- Some Bitcoiners have been cheering suggestions of a generational global recession
- The suggestion seems to be that Bitcoin will somehow not suffer from such a downturn
- If the past twelve months have taught us anything, it’s that the opposite is true
When Bitcoin Magazine tweeted yesterday about investment giant Blackrock’s warning that a generational recession is on the cards, the response from some Bitcoiners was toe-curlingly predictable. Claims of “Bitcoin will work” and “it’s time to buy cryptocurrencies” were some replies to the news, but a true, global recession, worse than 2008 as Blackrock is suggesting, is not a time when anyone should be thinking of buying risk-on assets, and being so wedded to this concept that Bitcoin saves all is a dangerous fallacy.
Lessons From 2008
For those who were of adult age during the 2008 financial crisis, the memory is still semi-fresh. The amount of job losses, businesses going down and overwhelming uncertainty over one’s short term future was palpable in the immediate aftermath. And let’s not forget that this was when there wasn’t a cost of living crisis, when heating your home wasn’t a luxury.
The cost of living crisis, the recent inflation issues, the resultant interest rate hikes and the Federal Reserve’s quantitative tightening program have all come together to form a perfect storm for the temporary death of risk-on markets – no one has any free money, and many are selling their riskier assets to free up liquidity to pay for essentials. This isn’t new – there’s a reason some stock indices lost two thirds of their value within 18 months when the warning bells began to ring in 2007.
Bitcoin is Not the Answer
Bitcoin, which of course was launched in the wake of the 2008 financial crisis, has never experienced anything like this. However, from what we have seen thus far, it has proved as successful a hedge against inflation as a pile of bricks. This was inevitable for a (relatively) brand new, risky asset that is still speculative in nature, and yet some devotees are still clinging to the belief that a full on, generational recession will prove to be Bitcoin’s coming of age.
We can equate bull markets to a fire, which needs a continuing supply of three things to keep going – fuel, oxygen and heat. For Bitcoin, these three ingredients are expendable income on a large scale, a placid global economy, and the right part of the crypto cycle.
Right now we have constricting expendable income, a global economy that is in the middle of huge turmoil, and we are in the beginnings of a potentially lengthy bear market. This is the exact opposite of what Bitcoin needs to thrive, and advocates should be aware of this.
Of course it will very likely pay to hold your Bitcoin in the long run, but expecting it to be the answer to your prayers if the world enters a generational recession is not a sustainable ideology.