Presently, Bitcoin, as well as other cryptocurrencies commonly known as altcoins, are lurking in the shadows of global economic processes, relatively anonymous to the general public. The ever-growing inhabitants of developers, enthusiasts, and traders are accelerating this new type of digital money – based on the innovative technology called blockchain – advancing to mass adoption. This process has been quite slow and daunting, but one factor may quicken its exponentially: the looming global economic crisis.
They are going to do it again
The past worldwide economic meltdown that happened in 2008 was detonated by the explosion of the US subprime mortgage market -it influenced every single country in the world. This time around, it would be quantitative easing (QE). This monetary policy stipulates the infusion of large volumes of liquidity by a central bank through the purchase of financial assets. Simply put, the bank prints a lot of money and then buys something like mortgage-backed securities (MBS) with that money to keep the capital markets afloat. It is like injecting a sick patient with potent artificial stimulants – sooner or later, his heart will fail. According to the majority of industry experts, it’s the QE that’s going to send the global economy in freefall, which could end in a harsh landing.
The abuse of quantitative easing is not the only factor that incentivizes the approaching downturn: we are currently witnessing the degradation of the US economy, the absence of a trade deal between the US and China, and civil protests around the world caused by the atrociously irresponsible fiscal and monetary policies. All this happens against the background of soaring financial markets, with the S&P index reaching the all-time high this month. But, as they say, what goes up, must go down. The question is, what people must do to avoid being crushed once again? The answer is already there, and it’s called cryptocurrencies.
Bitcoin as a hedge against economic turmoil
The prophecies of inevitable financial doom could have been frustrating back in 2006 because there wasn’t any comprehensible plan B for an average person. But now, there is a fully-functional alternative financial system that is accessible to anyone who’s connected to the Internet. We had already seen it in action when people in Venezuela and Hong Kong bought Bitcoin and other cryptocurrencies en masse to protect their money.
Bitcoin is a go-to digital currency right now because it’s still a dominant force with over 60% of total market capitalization. However, many other solutions push the development of this space further by making it more cost-efficient, accessible, decentralized, and democratized.
The use of the Proof-of-Stake (PoS) consensus algorithm obviates the need for electricity-hungry mining of the Proof-of-Work coins like Bitcoin and makes this process far more eco-friendly. There is also a concept of Decentralized Finance (Defi), which comes as a great alternative to conventional banking due to its decentralized, permissionless, and transparent nature. Ethereum is pioneering the Defi space, thanks to its efficient smart contracts and decentralized applications (dApps), inherent to its blockchain.
All in all, the realm of cryptocurrencies is far from being impeccable, but even at this stage, it could act as a haven for those who don’t want to entrust their financial wellbeing to governments.