Since the start of this year, the atmosphere in crypto assets was a lot more relaxed than usual. This did not in itself indicate a slow-down, however, individuals, as well as businesses, simply appeared to be more focused and calmer.
Crypto Media is changing as well. Articles were factual, acknowledging issues and indicating continued progress, despite some uncertainties. Fewer projects were popping up and showing off like crazy unlike 2018 when ICO craze prevailed. The fuzziness is clearing, this is still a valid statement, and there is no shortage of information and advertising. What we mean by this is that the articles emerging have more consistency than before, and are more concerned by facts than buzz. Without a doubt, this is a good indication of maturity.
The crypto community, as a whole, seemed positive on the short-term fate of Bitcoin, with appreciation expected in 2020. A number of gurus have made predictions, as have other big crypto investors, based on fantasy, and, of course, the bigger the prediction, the more noise seen on scoop-intensive crypto news websites. Some predict that a new all-time high for Bitcoin will be seen this summer, others claim a long-term market cap equal to gold (~8 trillion euros), and others foresee a new exponential growth in 2020.
Retrospectively, we can name all this the “calm before the storm”… It was a full blast in early March when a sharp decrease in bitcoin price coincided with global markets drop.
Indeed, across financial markets and across the planet, all asset classes have been uniformly hit by the sanitary crisis of the Coronavirus COVID-19 that spread from China to the world, hitting particularly violently Europe and the US, shutting down huge parts of the economy virtually overnight. The impact of such an economic slowdown is immediate and rather straightforward: tourism, travels, airlines, but also consumer goods, fashion, dining, recreational sectors are simply stopped for two months. Even if states claim that they are going to cover for the damages, pumping up their debt, a number of businesses are going to go bankrupt, triggering – finally will say some – an overdue recession period.
In such a situation, what is striking is to observe the simultaneous collapse in all of the markets. Cryptos have not been an exception posing the question, why did crypto react so strongly to the stocks collapse this time? The answer to that question is speculative but simple. As asset classes all collapse, some investors need urgently liquidity to cope with urgent matters (closing bleeding positions and take their loss, typically), so even on gold and bitcoin markets, there is an outflow of liquidity. And that would rather prove that this crisis is a serious and global one, hitting fast and everyone at the same time. Nothing indicates on the medium term that the correlation between crypto-assets and the traditional economy is to increase dramatically (or become more negatively correlated).
But from there, this is the ideal time for us to look further. Cryptocurrencies, led by Bitcoin, are at a crossroads. From a monetary system point of view, the post-Bretton-Woods system was established by default, based on the unilateral abortion by the US of the conversion of gold to the USD. Today, the crypto community is pointing out the flaws and inconsistencies of this system.
Specifically, the proposal of the crypto community is to open completely the range of media used for the storage and exchange of value, by making it possible to transact virtually anything that has some intrinsic value. This is evident by the tokenizing of gold and silver, Google and Toyota shares, and even pieces of art, however, BTC is also backed by something concrete: the energy expended to secure the network.
Hence, it comes as no surprise that enthusiasts of the gold standard have joined Bitcoin geeks in denouncing the central bankers that adjust monetary supply in an obscurely governed manner. And indeed, “experts” deciding what the supply of money should be, is somewhat questionable. It is subject to electoral considerations to technocratic points of view, and indeed, can be seen as artificial. Ultimately, this system has little relevance in the real world, and the criticism of inflation governance, which hurts people without notice, and enables huge public state debt, is founded.
The crypto community is relatively small, but it is very active and talkative. Crypto enthusiasts motivate their relatives and acquaintances to consider an alternative, hard-assets-backed system. Cryptocurrency pundits continue to increase in number, not only in industrialized countries but also in failed economies. Voices continue to be raised against the artificial management of the money supply. What is more, the continuous increase in the number of enthusiasts appears to be an irreversible phenomenon. As soon as one starts questioning the monetary system, as it exists, one realizes how inappropriate it is, and for the majority of individuals, there is no way back.
Bitcoin and the crypto community – meaning, individuals interested in pushing the legitimacy of crypto finance – are is now reaching a respectable size. A sizable fraction of the global population has heard of Bitcoin and other cryptos. A fraction of knowledgeable individuals have understood what it is actually about, and probably ~90% of them are convinced of the potential. These individuals comprise a significant number of people: maybe a few tens of millions… And they are all evangelists. It will be very interesting to see what sort of actual impact a group this size will have in the coming months. These are certainly exciting times!