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What will recession do to bitcoin? We analyze the Pros and Cons

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What will recession do to bitcoin?

There is a sense that we are heading toward a global economic slowdown. Some say, we will experience a mild recession in 2020 while others think this will be as big as 2008. That prompts an underlying question that many crypto lovers ask:
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What happens to bitcoin when a recession hits?

Will bitcoin survive a financial recession?

Will recession kill bitcoin?

What happens to bitcoin price if a recession hits?

If someone says they have an affirmative answer to these questions, they are just playing you for your money because no one knows for sure. However, we can look at the common market patterns and experiences we have gone through since bitcoin’s inception to draw probabilities that might help.

Let’s break it down in simplistic terms.  

Topics discussed under the Green category below are all in favor of bitcoin performing well in the event of a recession and topics in Red are the ones that may work against bitcoin.

Green: Bitcoin is still a nascent technology

In the world of progress and adoption, bitcoin is still in its infancy.  This means two things:

  • People do not know whether they can truly trust it or not
  • It has wild upside potential

To address the first point, bitcoin only has 35 million wallets as of 2019. 35 million represents 0.00897435% of 3.9 billion individuals with internet access. To reiterate, that’s 1% of 1%.

Pie Chart showing Bitcoin wallets across the globe

When thinking about blockchain and bitcoin, we have to think past people with bank access and people without it because blockchain promises to wipe out that difference. So for our purposes, we have to consider every single internet user as a potential bitcoin user of the future.

As I said at the beginning, we haven’t even started our journey when it comes to bitcoin and Cryptocurrencies.

From a potential perspective, we are yet to see a 1000+ fold in potential adoption. This sentiment is supported by Clem Chambers’statement“the whole cryptocurrency space is still only the size of a single Nasdaq blue chip, so there is a long way to go yet.”

Just to reiterate that statement, the whole cryptocurrency space is at a size of single Nasdaq blue chip company; One company. What happens when bitcoin alone reaches the market cap of Amazon?

Red: This 1000 fold potential also indicates ignorance among the masses

Bitcoin awarenessWhat is not even adopted by 1% can be easily forgotten or ignored by 99%.

During the period of a recession, people don’t think about HODLing or a bright technological future or a decentralized utopia; they think about keeping a roof over their heads, food on the plate, and safety & wellbeing of their loved ones.

This means we may even lose some early adopters and speculators in the 35 million list to the real FUD that the recession could induce.

A recession could mask the rational judgment of the pragmatic amongst us. This will be truer in case of those who flocked to bitcoin in the hopes of becoming millionaires overnight. They will be the first one to be scared out of bitcoin when the market goes to dumps during the recession.

These sellouts will cause mass hysteria and panic, which will further worsen the situation before the true visionaries and those with a long-term mindset endure the turbulent waters of a recession.

Green: Failing fiat systems could fuel bitcoin adoption

InflationBitcoin traded at a premium of 40% in Venezuela and 40% in South Africa and at a similar premium in Argentina. What is the common factor underlying these countries?  

Inflation. Failing fiat.

When inflation rises to uncontrollable levels, people hesitate to buy gold because it is easy to steal, difficult to carry around, and needs to be converted to fiat to spend. As a result of these inherent issues, some people have been turning to bitcoin, which is safe to hide with private keys, easy to move, and has been steadily increasing in value, much better than gold.

The U.S. National Debt has reached a whopping 22 Trillion dollars. Printing money to pay off this debt will simply not work, anymore.

When people realize that Russia, China, and North Korea are accumulating bitcoin alongside gold to back their fiat, and that the U.S. is sinking under the weight of its own debt, it will be difficult to trust the fiat that is backed by the big nothing.

This realization could work in bitcoin’s favor since it is the only currency with worldwide recognition and absolute zero need to rely on one authority or the other.

Red: USD reemerges as the world currency in case of a war, recession, or depression

According to some theories, whenthe USD weakens, there will be a recession or a war, and sometimes both.

This forces the nations around the world to put their faith behind the Green almighty. The U.S. invests in its national security heavily and does not shy away to showcase its power once in a while to keep the place of its U.S. Dollar intact.

In the event of a recession, the 99% we talked about earlier will be laboring for dollars. Since a recession marks pay cuts, job cuts, and an inherent shortage of fiat dollars in the hands of common households, the U.S. dollar quickly becomes the safe haven again to survive.

This scenario could work against bitcoin.

Green: Logistics issues around gold could prompt a bitcoin rally

Gold vs Bitcoin

Every time we talk about bitcoin in the context of the store of value, we inevitably compare it with gold. Most people in the current workforce or those who are just venturing into the workforce may not know that the U.S. Government at one point outlawed gold.

During the FDR era, gold was outlawed overnight, and people were forced to surrender their gold to the government.

Even when gold is legal, there are numerous restrictions on moving physical gold. First of all, it is a metal; that means it is heavy to move anywhere. If you move gold to another jurisdiction in substantial quantity, you will probably have to disclose it to the customs and may invite unwarranted attention from every single federal agency.

Moving 1000 grams of gold worth $45,000 (June 2019) will bring a lot of attention, and even if you succeed in moving it, how are you going to liquidate it safely?

To move $45,000 worth of bitcoin will take nothing more than a piece of paper with private keys or your phone with a secure wallet, with zero interference from any outside force.

Many outlets are springing across the globe that either accept bitcoin directly or convert it for you at competitive rates to any fiat you desire, to the fraction you need.

This convenience could slowly gain traction for bitcoin from gold aficionados.

Red: Gold has been in existence since the birth of the financial system

While logistics work in bitcoin’s favor, history favors gold because it is the oldest form of money known to man.

People trust gold because you can touch it, store it, and sell it when you need to. Gold has held its value steadily over the centuries.

Bitcoin, on the other hand, lives in the digital world and continues to swing up and down wildly; sometimes dipping 80%. This volatility has deterred many concerned investors from putting their faith in bitcoin.

Green: Bitcoin has been the best performing non-correlated asset, ever

Bitcoin’s performance over the last year (even during this crypto winter) or to that matter even close to a decade has been unmatched.  There is even a math around how if you were doing dollar-cost averaging irrespective of bull or bear markets, you would come out with a decent upper hand; we are talking double digit gains.

If bitcoin lives up to its non-correlated asset narrative, then theoretically, when the traditional markets sink and gold stabilizes, bitcoin should move in the opposite direction.  Even when everything comes back to normal and slow pace of normalcy is returned, bitcoin should perform on its own terms.

This independent movement may give bitcoin the needed attention during the time of recession and push it higher.

Red: Gold and USD are backed by trust of nations

Gold and US DOLLAR

While bitcoin is people’s currency, it is still in its first decade. That is infancy in the finance world. Gold and USD have been cornerstones of our financial system for the longest. Gold especially has been in use since humans evolved out of barter system.

The USD is backed by the great strength of American armed forces and hard work of the people that toil to earn their wages in dollars.

When a recession takes place, people are going to trust what they have accustomed to trust all their lives. They may not put faith in something that they hardly know about.

 

Green: All classes of people can participate with no minimums

Anyone can purchase bitcoin

Bitcoin is not controlled by governments or financial institutions. Anyone can invest in it, whether through an institution or buying it from other individuals who own it. Owing to the fact that there are no minimums, everyone gets a fair shot at investing in it.

In the traditional world, only super-wealthy or accredited investors get to invest in the ground floor of lucrative projects. Blockchain and cryptocurrencies are changing that unfair culture.

This means, there is a possibility that when fiat bubble bursts, people flock to bitcoin and a few handfuls of crypto projects.

Red: Highly manipulated space

cryptocurrency bitcoin manipulated spaceBecause there are little to no-restrictions (although this is quickly changing), many questionable practices are thriving in the crypto space.

The rumors around Tether pumping the prices of bitcoin to benefit its own wealthy customer base have made rounds in the crypto circles for some time.

Many exchanges have shut their doors and vanished with all the funds. Many people were scammed into investing in con projects using outright unethical marketing practices.

During a market panic, one such story of crypto scam could send the whole market tumbling down, taking bitcoin along with it.

Red: First recession may be the toughest for bitcoin

While bitcoin is used to facing volatility of 85% and yet continue to march on, an actual financial recession might put unprecedented stress on such a dip.

As bitcoin has never been through an actual recession, it could have a drastic negative impact, at least at the outset, on it.We wouldn’t be surprised if prices slash down to 80% from its peak.

This potentiality of the wild dump in case of a recession will force some blockchain companies to close their shops since they will not have the fluidity to run the business using crypto. This further increases the selling pressure in the market – lowering prices even further.

Green: First recession may be the last recession that bitcoin will ever face

After bitcoin goes through its first recession, the narrative around it being a non-correlated financial asset and a better store of value will catch on.  When this happens, bitcoin will steadily find its ground and will start its uptrend.

Unlike gold, bitcoin’s finite supply may help drive its price higher each year making it better than gold for those who are looking for a safety net that can withstand or beat inflation.

Green: Finite supply of bitcoin will help its value

Bitcoin’s finite supply and its halving event have always pumped the value of bitcoin. Now that more people are assigning a small portion of their portfolio into bitcoin and institutions are entering this space, the demand is constantly rising while the supply shrinks.

It is a simple economic principle. When demand is high and supply is limited, the market sets the price at a premium.

When this factor plays out, even during a recession, people will continue to put money into bitcoin to keep it afloat or thrive during the economic meltdown.

Red: A bitcoin alternative currency could kill the bitcoin mania

blockchain vanishAlthough a long shot, it is still in the realms of possibility that an alternative much better than bitcoin, both in terms of network strength and trust, could emerge that could send bitcoin to the dumpster.

Just to set the record straight, we are big fans of bitcoin. However, when considering the pros and cons, we have to be ruthless about what factors could work against bitcoin.

MIT announced that it has developed a cryptocurrency that reduces data users to join the network and verify the transactions by 99%. Of course, new types of cryptocurrencies do not mean bitcoin is going to be made redundant tomorrow; however, it may drag its price down dramatically.

And if such innovation is announced during a recession by a reputed body (like MIT or Harvard or NYSE) – then that could hurt bitcoin really bad.

Conclusion

Based on all the factors discussed above, you can draw your conclusions and place your bets on the scenario you think will play out the most.

In our opinion, even with a temporary dump of bitcoin in the event of a recession, things should bounce back quickly to help bitcoin find its ground and get back on its uptrend.

Thank you for reading the article.
Subscriber-Banner-smallIMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

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About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new blockchain technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.”  Of course, that is just his opinion.

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All Roads Lead to $100K Bitcoin: Various Perspectives that Support $100K BTC

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Bitcoin to 100K

Bitcoin to 100K

There are a lot of theories in the crypto space that argue that Bitcoin will reach $100,000 before the next halving.  Some even argue that we could reach that price point before the end of 2021.

Here we have compiled a few perspectives that support a higher price point for Bitcoin.

IF we missed any, please let us know and we will be glad to add it for others to read.

Bitcoin’s ability to reward savers

If you saved $100,000 throughout 2017, today its value would have been $94,000, a total loss of 6% due to inflation. That is without considering the fees and hidden charges that institutes charge.

Even if you invested in the S&P 500 for 12 months at $8333 each month throughout 2017, your portfolio value today would have been $110,000.

If you saved $100,000 in Bitcoin throughout the 2017 (prices ranged from $920 through $14,000 during Jan 2017 through December 2017).  For the purposes of this comparison we are using the last week prices from each month as available on Coinmarketcap historical snapshots.

$100,000 invested in equal amounts throughout 2017 would look something like this.

Bitcoin to 100K

Since 2017, Bitcoin price has crashed and rebounded.  At the lowest point of the crash of $3000 per bitcoin, your portfolio value would have been $144,000.

In today’s average price of $16000 per bitcoin, your $100,000 savings would have been worth $770,000.

Due to its increasing demand and reducing supply, Bitcoin is expected to reach $100,000 in the next 4 years. Some models show that bitcoin will be worth $1 Million by 2030.

Only time will tell us whether bitcoin reaches these prices or not, but point being, no other asset of any class has crazy growth predictions like Bitcoin has.

Stock-to-flow ratio

According to Plan B, Gold had the highest stock-to-flow (SF) ratio of 62.  That is, it will take 62 years to produce the gold that is currently in the market.  In other words, you cannot willy-nilly inflate the supply in a year or two due to how scarce gold is and how difficult it is to find and mine it.

Current SF for Bitcoin is 25, however, by the end of 2020 or 2021, this could jump to 50.  By the next halving in 2024, Bitcoin could surpass the SF of gold.

According to Plan B, “The predicted market value for bitcoin after May 2020 halving is $1trn, which translates in a bitcoin price of $55,000. That is quite spectacular. I guess time will tell and we will probably know one or two years after the halving, in 2020 or 2021. A great out of sample test of this hypothesis and model.”

However, following the trajectory of Plan B’s SF analysis, Bitcoin could easily reach $1 Million dollars by 2030, according to some commenters.

Stimulus and unlimited printing of fiat

COVID has exposed another flaw in the fiat system.  It is that governments can print as much money as they wish whenever they wish to do so.

Whenever governments resort to simply print money without having a basis in asset value or growth in GDP, it erodes the value of the fiat in circulation.

This is what happened to Argentina, Venezuela, Zimbabwe and more.  

The US dollar has lost over 99.97% value since 1900.  For instance, whatever you could buy with $1 in 1900 will need $31 today.

COVID has added salt to the wound for fiat.  It exposed the blatant fact that governments can and will print money to their whim without regard to the inflation and impact on savers.

This increased supply in fiat helps stock market and market liquidity which in itself helps people who are invested in the stock market and other vehicles which is generally the wealthier part of the society.

Other factors strengthening the crazy Bitcoin price predictions

  • Institutional FOMO, for instance, Square, PayPal, Grayscale, etc., entering the market
  • Easier onboarding of new retail investors
  • Greater technologies and DApps being built on Bitcoin 
  • Great DeFi services to lend and borrow money
  • Globally accepted single denomination that does not need to be converted in the future (with enough places accepting bitcoin)

What other factors do you think will contribute to Bitcoin’s shooting past the $100,000 barrier?

Let the FOMO begin…

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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Crypto Roundup: All Your YouTube Influencers in One Place

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Crypto Roundup

Visit our Crypto Roundup section daily for a dose of all your favorite Crypto YouTube influencers in one place.    

Worried about missing updates from your favorite YouTube crypto influencers?  

Welcome to the Crypto Roundup.  

On this page, we will post a quick summary of the videos from some of the most popular YouTube crypto influencers.

Ivan on Tech  Altcoin Daily

Crypto Zombie Box Mining

Ellio Trades Lark Davis

Data Dash Bitboy Crypto

MMCrypto Chico Crypto

Altcoin Daily

Video title: Bitcoin Will Be OVER $20,000 By Christmas 2020! BIGGEST WEALTH SHIFT OF OUR LIFETIME! Cryptocurrency

Date: 19-Nov-20

  • World’s biggest wealth shift of our lifetime is happening right now and no mainstream media is talking about it, except CNBC.

  • Preston Pysh predicted on August 26th that: “Bitcoin should be reaching its all time high by Christmas.”

  • If you are looking to buy a dip, there may not be one.
  • Ricardo Salinas Pliego, a mexican billionaire, has just revealed that 10% of his liquid assets are into bitcoin.

Lark Davis

Video Title: STOCKS HIT NEW HIGHS! WILL COVID VACCINES LEAD TO MEGA PUMP IN 2021? [Are You Ready?]

Date: 19-Nov-2020

  • Stock markets and bitcoin pumps higher on the news of the second successful covid vaccine.
  • There could be more chances for the new stimulus. Means more inflation, more debt and simultaneously pumps stocks, gold and bitcoin.

Crypto Zombie

Video Title: BITCOIN $18.5k TOP!!?! DON’T BE FOOLED!! HODL FOMO BEGINS!!! $TRILLIONS FLOOD!!

Date: 18-Nov-2020

  • Overall sentiment of Bitcoin has changed drastically from ICO craze in 2017 to a time where people are FOMOing to own more bitcoin.

Ivan on tech 

Video Title: BIG WARNING TO ALL HODLERS!!!!!!!!! DO NOT GET REKT!!! BITCOIN $18,500 REJECTED – NOW WHAT?

Date: 18-Nov-2020

  • Ivan expects bitcoin to shoot past $20K resistance before end of this year, giving it 85% probability

Chico Crypto

Video Title: World’s Most Powerful Turn BULLISH on BITCOIN

Date: 19-Nov-2020

  • All those who hold big bags of Bitcoin will come out of the shadows to talk up the Bitcoin rally, a $20K bitcoin could be on the cards before the end of this year
  • Ethereum mining could act as a big catalyst for Ethereum’s price
  • Big companies like google could play a bigger role in mass adoption of crypto

Let the FOMO begin…

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Lessons from the Veteran HODLERS to the Newbies!

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Lessons in Crypto

For all those who entered the crypto market after the 2017 bull run – here are few lessons from the HODLERS from the last bull run(s).

This is our attempt at making all you newbies aware of the mistakes veteran cryptoers did.

Let’s get started…

Don’t FOMO in to all the hype

FomoIt’s hard not to FOMO in crypto.  The trick is to make sure you don’t lose your shirt in crazy bets.  Always limit your bets to what you are comfortable losing.

The common ways you can become victim of FOMO are:

  • Following your favorite YouTuber without actually doing your own research on the project.
  • Investing into projects at the top.
  • Believing in promises of 100x or 1000x without any substance behind those claims.

HODLing far too long

Remember why you are into crypto – to make the money.

Never fall in love with your crypto, and HODL the tokens even when they are 10x and more.

Have a strategy to take your capital out before you become a HODLer.  

If you believe the project really has what it takes to go beyond 100x and more, just sell in instalments so as to not miss the ride.

One of the best ways to HODL is to take your capital in full and profit in tranches.

This rekt story will give you a right perspective of what it looks like, it’s one of many:

Don’t put all your eggs in one basket

Never go all in on one project. No matter how strong the project may look, even the projects with strong fundamentals don’t do well sometimes. 

And, you will be kicking yourself watching other projects go up and your portfolio just doesn’t seem to make a move.

And don’t over do it and have a portfolio with over 100 projects either. It is very difficult not to have invested in more than 15 projects but anything less than 20 is a good way to go, in our opinion. 

Put aside the share of Profits for Taxes.

One way you can get a good night’s sleep is by paying taxes. 

Always keep a habit of putting aside a % of your profits in USDT or other stable coins, as a reserve to take advantage of market volatility and also to meet your tax obligations. 

Exchanges are more evil during bull run

Foreign ExchangesDon’t trust exchanges. Yes we already know that, but they play more games during bullrun, some intentional and some technical. 

Many exchanges tend to go under maintenance when the prices shoot up too high too soon (Coinbase?), and you can’t sell. 

And the shady exchanges scam out before you know.

Regulators seem interested when the market cap of these projects goes through the roof, which then adds FUD around the project crashing the prices.  

Exchange may freeze funds pending investigations when such issues arise.

Take for example OKEx. Users are unable to withdraw their assets from the exchange for almost a month now, not certain if they ever will, and all that started with the legal dispute.

Never fall for Arbitrage gains

Arbitrage is when you buy in one exchange at a lower rate and sell on the other for a higher rate to take some profits. 

Some shady exchanges show a lot higher prices than the other genuine exchanges and when you deposit your assets to sell at those prices there won’t be actual volume to execute the trade. You may be stuck with either a high fee for withdrawal or other funky rules to take your own money out. 

Remember, there is no free Giveaway

Free CryptoScammers rise with the rising market.  

When the crypto market buzzes with all time highs – scammers cash in big time on newbies.

The most lucrative scam in crypto is ‘Free Giveaway’. Whether it be through YouYube ads or discussion groups and wherever they can get your attention.  Read this article on various sophisticated scams that are being deployed.

We hope these lessons help you through your trades and crypto life.  Stay safe and always DYOR.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

Continue Reading

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