Is Cryptocurrency Ready To Step Up During The Economic Shock?
The world is undergoing a drastic change. We are seeing trillions of dollars wiped out around the world. The impact from the global shut down is now just starting to be felt. What will come is going to be something we never saw before.
Before this hit, the global Capital Formation was around $420 trillion. This is the value of all stock, real estate, bonds, etc. It is estimated that the world will see a $30 trillion hit to GDP. This is a drop in the bucket when as compared to the loss in Capital Formation.
Many are focusing upon the fact that governments are spending like crazy while central banks are spending money like never before. As big as the numbers are, they are nothing compared to what is being destroyed.
Unfortunately, governments and central banks are always behind the curve. The Federal Reserve, for example, has issued $2.7 trillion in "stimulus". Leaving aside most of it is in the banks hands, not even getting into the economy, this shows how little they are truly doing.
This week it was reported that Americans have already lost $1.3 trillion in wages. It is a number that is only going to keep growing. Their response of $300 billion in direct payments and small business loans of another $700 billion do not even cover the loss wages. Of course, this does not account for the loss equity in small businesses nor all those people who do not work as W-2 employees.
When people's savings are being wiped out. The government was kind enough to change the rules so that people could tap into their retirement accounts during this crisis. So now we are seeing a draw down in the money people set aside for the later years.
The "reopening" of the economy is slow to take hold. There are many sectors that are going to face a long road ahead. Anything related to hospitality is cooked for some time. Airlines, restaurants, theme parks, and hotels will face lower numbers for years to come. One airline executive claimed it would take 3 years for the industry to get back to where it was pre-virus.
In short, all the numbers look bad.
Is this, however, the time for cryptocurrency to step in and make up for the shortfall? At present, we are looking at roughly a $250 billion dollar industry with room for enormous growth.
Will people start to look for other alternatives as a means for compensating for the monetary loss that they suffered?
This is the golden opportunity before us. When people are hurting they look for alternatives. Cryptocurrency is nothing but an alternate economic system from the one that almost all of us operate under. While it is still in its infancy, things are moving quickly in terms of the infrastructure to provide people with options.
Thus far, most of the attention is given to Bitcoin. As the largest cryptocurrency, by an overwhelming margin, it makes sense. However, the challenge with Bitcoin is the fact that it is looked upon as an investment. In other words, people buy Bitcoin. When something is viewed in buy and sell terms, it is not thought of as a monetary unit.
Simply put, people are not looking to earn Bitcoin.
Nevertheless, this is what is required by the masses. The chance that exists here is to put money in people's hands. This is done as a reward for efforts undertaken. An industry that focuses upon this is one that can step into the hole that was created by the global shut down.
Thus far, that has not taken place. Some in the industry are starting to opine how the cryptocurrency crowd is too short-term focused. Much is about minting money and cashing out. This can be seen in the fact that there is an absence of "shopping" available. Essentially, there is $250 billion in cryptocurrency and no place to spend it. The industry is focused upon when Amazon or Wal-Mart will fix that problem by accepting cryptocurrency as payment.
The next few years are going to see the continuation of an overall deflationary spiral. Unless there is a "v-shaped" recovery, the financial impact is going to extend far beyond the private sector which bore the brunt of it thus far. Governments are going to find themselves with a great loss of tax revenue, causing them to have to cut. At the same time, they will raise taxes cutting into disposable incomes, furthering the economic impact. Pension funds are already coming under pressure which will be magnified if (when) the stock market pulls back. Finally, government bonds are going to be tougher to sell as people lose confidence in government.
All this presents an enormous opportunity for cryptocurrency. We do not need regulation to take over. The fact that the "regulated" financial system is in free fall tells us all we need to know.
An alternate system has to step up. The question is will we do what it takes to ensure that?
The world just suffered the greatest economic shock in its history. To me, this spells opportunity.
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Cryptocurrencies need to scale. Hive could do it.
Without a doubt they need to scale although with each new chain created, there is more scaling taken place since the total capacity is increasing.
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That's an important point. Hence the need for cross-chain swaps.
What I predict is this: When people become disenfranchised be the current system, some of them end up in the crypto space doing work for crypto, hence creating ways to spend crypto for goods and services. That way, there is less need to go through centralized exchanges. With cross-chain swaps, one can transfer value from one chain that could be used for one type of activity in one region to the next that is used for something else. At the top of the value hierarchy, there would be Bitcoin, the ultimate savings technology.
Add mesh networks and strong encryption to the mix and you could end up with an expanding barter network powered by crypto as a medium of exchange. No doubt the authorities will try to enforce tax and AML laws. But when tens of millions of people in the US end up in dire straights chances are that these networks will be able to keep a lot of people alive.
I agree with all you posted here in this comment. There is no doubt that associated decentralization mechanisms such as mesh networks and edge computing will only foster a greater move in the direction you mentioned.
I look at the totality of the crypto holdings, not what chain they are on. Think about all the digital assets people will be holding similar to Splinterland cards. Picture the day when there are 10,000 blockchain based games that are all distributing digital assets in some form. What are the authorities going to do then?
There are more than 2 billion gamers globally, this is a market ripe to embrace assets they own for playing games.
In due time, we will reach a point where all of this is impossible to stop.
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I don't think it is the time for mass adoption yet.
More than 99% of people don't understand the banking system. More than 99% of people don't understand cryptocurrencies.
Less than 1 % who think they understand the banking system, they don't see it live in front of them but understand the workings.
Less than 1 % who think they understand cryptocurrencies, they cannot differentiate between a decentralized cryptocurreny and a centralized one.
It's too much to expect from people to adopt something they don't even understand.
During a global financial crisis, people are hoping to survive. With the mainstream media holding their attention and the effects of global lockdown surrounding them, they want to move out of the crisis.
They have no choice but to do what the government says. Banks are slashing the reserve ratios to increase the supply and indebt the public to deal with the financial catastrophe.
As most people don't understand it, they won't risk anything and would depend upon the government guidelines. A small percentage will care to study and educate themselves and they will consider and most likely adopt the decentralized supply side by side.
For most people, banks will multiply the money supply with the further decreased reserve ratio, which is not going to increase back to what it was even when the crisis gets over.
The economic shock will make people avail the loans like never before and this trend will continue for many years in the new economy.
The adoption of cryptocurrencies will be there but true adoption of decentralized supply will always remain slow and steady as people should be wanting to educate themselves. That's what I believe.
People don't need to understand it. They just have to have it slipped underneath them.
Getting the West to onboard, such as in sheltered places like the UK, has been difficult, compared to places where banking and getting capital is difficult.
The system shocks will probably accelerate the adoption of cryptocurrencies, and could lead to a dramatic increase in HIVE users for example. If a critical mass of people onboarding in places like the UK is reached, this will lead to mass adoption across the country, and spread to other countries.
Time will tell.
It appears that the third world nations will end up leading in adoption. If a place like the UK could get a significant percentage of the population using crypto, say 4%, that would be enormous.
However, the adoption rate might increase due to the financial shock to the entire planet.
Hopefully we see an increase in activity ongoing. This is too important to get lax with.
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I've been targeting certain independent excellent content creators with big followings in the UK. I'm hoping to at least get one to join. Should hopefully lead to a storm of their followers joining, as well as other similar content creators doing the same. Just need to get someone to make the initial leap to open the floodgates. So far it seems promising, with some seeming interested and saying they will look into it.
Yes all helps. Getting a couple big fish would open up the floodgates.
I am presently trying to attract some with decent followings in the financial arena to use Leofinance. It is tough because you need to get with someone who understands cryptocurrency which few do.
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Actually the exact opposite is happening. Banks are not lending and they are increasing their reserves across the board. Hundreds of billions the Fed pushed out is just sitting in the banks. They are already increasing lending standards which is also reducing it. The mortgage market in the United States, for example, was basically frozen.
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https://in.reuters.com/article/us-china-economy-rrr-cut/china-pumps-79-billion-into-economy-with-bank-cash-reserve-cut-idINKBN2101B3
Banks are slashing the reserve ratios.
Central banks cutting the reserve ratio does not mean banks follow through.
All the major banks are raising funds while in expectation of rising bad debts as loans turn bad. They are also increase lending standards which slows lending.
The Keynesian view of the world is misplaced. Central banks think they control the economy but the reality is they cannot for demand and banks will operate in their own best interest.
Here is BOA who raised $26 B. This is in addition to the $66 billion set for bad loans.
http://investor.bankofamerica.com/news-releases/news-release-details/bank-america-has-raised-26-billion-capital-plan-date
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Increasing the reserves is not opposite of slashing of the reserve ratio. They work great together and increase the supply many times over a period.
My body is ready
I don’t see the current system surviving in its present form. I think mass Crypto adoption will occur out of necessity. Ultimately it will be up to the people to realize that central banks don’t have their best interests at heart.
Sure. The COVID-19 is going to be a huge catalyst for blockchain-based projects in business etc.