There are many signs that indicate the imminent onset of a new economic crisis. In this regard, many crypto enthusiasts are wondering how digital currencies will behave.
If you look at the yield curve, which is usually considered by economists as the main harbinger of a recession, you will notice that over the past year it has steadily declined.
In general, since the beginning of the year, there has been a downward trend in world markets, which makes many economists suppose an inevitable economic crisis. Economic indicators show a marked slowdown in industrial production and demand, not only in Europe, but also in Asia and the United States.
The cryptocurrency market, on the contrary, shows good prospects, since speculative investments cease to work during the recession. Thus, the difficult economic situation can contribute to the growth of cryptocurrencies, raising them to the mainstream.
This thesis is reinforced by the situation in the last two years in Venezuela and Argentina, which have long struggled with the problem of hyperinflation and a serious recession, as a result of which the adoption of some cryptocurrencies is quite high.
This process is also due to the fact that bitcoin is increasingly seen as a means of accumulation. Bloomberg analyst Mike McGlone recently wrote that cryptocurrency is “gaining momentum as a storehouse of value and digital gold.”
Since blockchain technology is decentralized, cryptocurrencies, especially bitcoins, are beyond the control of governments and central banks. If the recession falls on the United States again, people will be able to resort to an alternative solution based on blockchain technology.
The government can always print more money and add it to circulation, which is impossible with most cryptocurrencies. Moreover, cryptocurrency prices depend solely on the dynamics of supply and demand and are free from state supervision or intervention.
Of course, this does not apply to all cryptocurrencies on the market today. Most startups that issued tokens during the initial coin offering (ICO) period do not have a work product.
Bitcoin is likely to become the first cryptocurrency to be widely used, although at present the network cannot handle a large flow of transactions. In December 2017, transaction fees increased to double digits, which made small transactions impossible. However, the introduction of Lightning Network technology solves this problem.
Ethereum and Litecoin can also be used for payments, and this may be an opportunity for cryptocurrencies to grow without speculative excesses.
Publication date 08/26/2019
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