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The crisis of 2020, the arms race and Bitcoin: where the world and the first cryptocurrency came to be 10 years later

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On October 31, 2008, six weeks after the collapse of one of the largest investment banks, Lehman Brothers, which eventually became a global catastrophe, a person or group of people under the pseudonym Satoshi Nakamoto published / / and white paper the first in the history of a decentralized payment system.

The emergence of Bitcoin has become the apogee of many years of attempts by the cipher bank community to create an alternative monetary system without a single point of failure, reversibility of transactions and total surveillance. But even prominent shipropank not able to see the revolution in the bud.

The current head of Blockstream, Dr. Adam Beck, who designed the Proof-Of-Work algorithm as early as the last century, ignored the letter from Nakamoto when he asked him to evaluate the concept of Bitcoin. Just entered the creator of b-money Wei Dai, although later and regretted it. James Donald, a veteran of the cryptographic movement, questioned the idea because of the constantly growing amount of data in the blockchain, and only Hal Finney began to actively help the development of the project, despite the fact that he sometimes lost his enthusiasm.

The personality of Satoshi Nakamoto and the motives for creating Bitcoin still remain a mystery, which they are trying to unravel outside the community. Nevertheless, the fact that the genesis block of the first cryptocurrency currency contains the title of the article “ Chancellor on brink of second bailout for banks ” from the British publication The Times may indicate that the global financial crisis of 2008 and the repurchase policy of large banks States were one of the incentives of Nakamoto. This is indirectly confirmed by the next entry on the P2P Foundation website dated February 11, 2009.

“The main disadvantage of traditional money is that they need trust. We must believe the central banks, although they have repeatedly betrayed this trust and devalued fiat money. We have to trust banks in keeping our money and electronic transfer, however they constantly borrowed them, creating credit bubbles and leaving almost nothing in reserves, ” Nakamoto wrote.

One of the fundamental pillars of Bitcoin has become a limited issue, laid down at the protocol level. Despite the fact that due to the random error of Bitcoin Core developers in 2016, the network foundation was subjected to an existential threat, the cumulative number of bitcoins should never exceed 21 million.

The fact that this characteristic of Bitcoin can be the strongest argument in its favor in the context of the global recession, the first Bitcoin.org administrator Marty Malmi guessed . Since millions of people then lost their jobs and savings, something not subject to inflation, in his opinion, should have attracted their attention.

It was in such difficult for the world conditions that Bitcoin appeared – an alternative peer-to-peer payment system. Then the first cryptocurrency expected a long and exciting way, ups and downs, adoration and hatred, the formation of a solid strong community and its subsequent split [ SegWit2x and Bitcoin Cash ]. BlockchainJournal tried to figure out where this path led, whether the original hopes of the early Companions came true and what is the role of Bitcoin in the world, which, according to many, is again on the verge of a severe crisis.

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In September, Nouriel Roubini, a well-known Bitcoin critic and professor of economics at New York University, also known as Doctor Doom, who predicted the crisis of 2008, said that by 2020 all the necessary conditions would be ripe for the global recession to start. Moreover, in his opinion, this crisis will be much tougher and longer than the last time.

Thus, he argues, the tightening of monetary policy in the United States, the trade wars of the Trump administration and the unresolved situation with the debts of some eurozone members against the backdrop of the bubbling American stock market will have a negative impact on the global economy.

In one of his recent posts on Twitter, Roubini stressed, not without pride, that his articles are translated into dozens of languages ​​and published on hundreds of news resources in hundreds of countries. Obviously, to ignore the fame and influence of an economist is really not worth it, since many listen to him precisely as a person who predicted a crisis.

However, few people remember Roger Babson, who predicted the collapse of the stock market in 1929. His trick was to predict a financial collapse from year to year until it really happened, which eventually earned him a reputation as almost a genius when the Great Depression began.

It was extremely difficult to catch Babson on constant false predictions, since it was not possible to google his previous statements in the 1920s. Now it’s quite difficult to remove anything from the World Wide Web, but the predictors are not becoming more careful.

It turned out that Roubini predicted that the “perfect storm” in the global economy would begin in 2013 ( CNBC ), the bubble in the US stock market would burst in 2016 ( Business Insider ), and another credit bubble would inflate by 2017 ( Project Syndicate ). In this case, the argument, as in the case with the forecast for 2020, was largely repeated.

In his current forecast, the economist noted that once the “ideal storm” begins, countries with dominant populist movements and governments on the verge of insolvency will not be able to redeem debts of financial organizations.

It was this policy that once criticized Satoshi Nakamoto and even paid attention to it in the genesis block of Bitcoin. For many decades, large banks have pursued a policy of consolidation, constantly absorbing smaller institutions or carrying out mergers. The top management of such giants is sacredly convinced of one thing – when the thunder breaks out, the government will redeem their debts, because they are too large to fall apart, and the management will be able to write out fabulous awards for not knowing how to manage their organization and even more means of their clients. That is what happened in 2008, and Lehman Brothers was an exception, because they were denied funding.

As Meredith Whitney, an analyst at Oppenheimer & Co financial company, proved at one time, the leaders of leading banks on Wall Street completely failed to understand the nature of subprime mortgage bonds and lost billions of dollars not because of corruption, but because of their own stupidity. On November 1, 2007, this woman brought down shares of Citigroup Inc. by more than 7%. Whitney did not make dozens of predictions about future crises, like the same Roubini, she simply said that incompetent people who, in 2008, the Fed rescued on an emergency basis, were at the helm of world finance.

Thus, the bailout culture was consolidated during the last crisis and continues to exist to this day, and large banks are becoming even larger in order to receive a saving package from central banks at the expense of taxpayers when the next crisis breaks out. In fact, the Darwinian survival law of the fittest, which can be applied to free competition, simply does not exist for such structures.

[pictured: an unidentified man encourages people to buy Bitcoin during a speech by Fed Chairman Janet Yellen before the Committee on Financial Services of the House of Representatives in the US Congress, July 12, 2017]

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However, sooner or later, the economy will indeed face a crisis, and it would be foolish to deny it. Over the past ten years, it was Bitcoin that was the very tool that helped people in countries with a stagnating economy to at least somehow exchange value and insure savings. First of all, of course, we are talking about countries with rapidly depreciating national currency, such as Venezuela and Argentina.

In the short documentary “Bitcoins in Argentina”, published in 2013, the Bitcoin trader told about the total nationalization of the business, thirty percent inflation and hard currency restrictions. At that time, most of the Argentine population couldn’t actually open a simple bank account and get a credit card, and in the fall of 2012, the country's government ordered PayPal to terminate domestic private transfers.

It is noteworthy that it is a native of Argentina Venses Casares, founder of Bitcoin companies Xapo, verify the effectiveness of the first cryptocurrency PayPal then-president David Marcus, who later held the seat in the board of directors Coinbase, and is now engaged in the development blokcheyna to Facebook.

In Venezuela, on the background of hyperinflation, the volume of trading on LocalBitcoins speaks for itself. Similar phenomena were observed in Turkey and Iran , where, due to economic shocks and sanctions, people used Bitcoin to insure themselves against financial risks and loss of control over their savings.

It is difficult to say what role Bitcoin will play in the coming crisis, but residents of developing economies have already noted the usefulness of the first cryptocurrency at a time when banks and governments cannot be trusted.

It’s not to be denied that in developed countries the public attitude to Bitcoin is different, but it can still change when some government announces another multi-billion dollar plan to save the system, which is attacking the same rake.

Back in 2011, the main subject of Bitcoin was the economy of the dark market-marketplace Silk Road , and most people, including today's cryptocurrency entrepreneurs, saw it as a financial pyramid, now around it an entire business ecosystem has been created that merges step by step with the traditional financial system, regardless of whether it is good or bad.

Thus, over 10 years, contrary to the prohibitions and ardent criticism of Bitcoin, it has gone from anarchist origins and illegal digital markets to hearings in the US Senate, unicorn companies and the most powerful lobby. Today, Coinbase’s capitalization has reached an impressive $ 8 billion [for comparison, Yandex’s capitalization reached $ 9.13 billion on October 30], Chinese mining equipment manufacturers are going for an IPO, giant investment holding Fidelity Investments is launching a cryptocurrency custodial service, the New York Stock Exchange operator is developing Bakkt's digital asset trading platform, and Goldman Sachs invests in Bitcoin startups.

Will bitcoin affect a possible drop in the stock market, given the buildup of institutional presence? Many analysts have repeatedly tried to trace any correlation between digital assets and the securities market, although a few years ago they would all laugh together even at the very thought of it.

This year we witnessed two synchronous falls of Bitcoin and stock markets (in February and October ), but this does not necessarily indicate a direct connection. Some experts suggest that withdrawing funds from the cryptocurrency market at the time of the traditional shocks may be related to the fact that venture capital investors are looking for ways to cover their losses, primarily selling the highest risk assets, although the volatility of Amazon and Netflix stocks has recently exceeded the bitcoin volatility.

Others are convinced that since traders have only one brain and one decision-making center, during periods of turbulence they tend to sell all their assets, regardless of whether they are connected to one another. Nevertheless, the more talk about a possible correlation, the greater the chance that this will become a reality, because people will make decisions not on the basis of objective information, but on the basis of the conjectures of others.

It can be assumed that the likely financial crisis will cause serious damage to the cryptocurrency business, which also uses bank accounts and operates with fiat funds. At the same time, will bitcoin become a tool that will allow people to escape from the “ideal storm”, in Rubini's words, depends largely on solutions to the scaling problem (how many users can interact with the network at the same time) and UX (as far as it is simple and understandable for the inexperienced) .

In an exclusive interview with BlockchainJournal, leading Bitcoin Core developer Jonas Shnelli stressed that, despite the distance traveled, the network is not yet ready for mass use.

“UX in Bitcoin is far from ideal, it is extremely difficult for people outside geek parties. And I am glad of this, since we have neither Lightning, nor instant payments, and the problem of commissions has not gone away. The current level of UX gives us time to solve technological problems, after which we will focus on user interaction, making Bitcoin as accessible as Whatsapp. If all people come to Bitcoin right now, then it will probably not survive. We are not ready yet. ”

Nouriel Roubini also suggested in his essay that against the background of a slowdown in the US economy, Donald Trump will try to unleash some kind of foreign policy conflict or even military confrontation (in his opinion, with Iran, since North Korea has nuclear weapons) to win the 2020 election of the year. Despite the fact that the economist’s predictions come true with the same probability that the good old “eagle / tails” works with, this statement sounds extremely ominous, given the recent statement by the head of the White House about plans to leave the INF Treaty, which may entail a new arms race and other political upheavals that are putting pressure on financial markets and the global economy.

Also, the 2020 crisis is predicted in the JPMorgan & Chase holding. The organization's analysts believe that it will not be too long, but the indices of the American stock market will decrease by 20%, quotes on the energy market will collapse by 35%, and non-precious metals – by 29%.

Nevertheless, to assess the accuracy of complex mathematical models used in JPMorgan & Chase, it is worth going back to the previous decade and see, for example, how often the holding’s forecasts for the USD / EUR trading pair came true from 2001 to 2010. It turns out that the average error was a whopping 30 cents [source – “To understand the risks. How to choose the right course, Gerd Gigersentser].

However, taking into account the frequent statements about the impending recession, including from such figures as George Soros , a scenario of “self-fulfilling prophecy” can be realized, in which the crisis will strike not for objective reasons, but because everyone talks about it.

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Bitcoin and blockchain technology are rapidly changing the world – from finance to the public sector. 10 years ago, Satoshi Nakamoto probably could not have imagined that his invention would be discussed at the G20 and in the White House, because before that, the encrypters had been in the shadow for decades.

What will happen in 10 years? Probably, you shouldn’t be like amateurs to give empty predictions in a world where black swans decide everything, but you just have to follow the dizzying world of cryptocurrencies with BlockchainJournal!

Nick schteringard

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TOP 10 CRYPTOCURRENCY

#NamePriceMarket CapChangePrice Graph (24h)
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  • bitcoinBitcoin (BTC) $ 20,189.00
  • ethereumEthereum (ETH) $ 1,350.84
  • cardanoCardano (ADA) $ 0.431261
  • polkadotPolkadot (DOT) $ 6.38
  • litecoinLitecoin (LTC) $ 54.57
  • chainlinkChainlink (LINK) $ 7.88
  • stellarStellar (XLM) $ 0.120031
  • bitcoin-cashBitcoin Cash (BCH) $ 123.01