AS we enter the “Despair” section of our chart, it is important to take a step back and look at what brought us here in the first place and events in the near future.
Bitcoin was developed in part as a backlash to the mishandling of sub prime mortgages by large banks. This is what caused the 2007-2008 financial crisis which in turn led to the great recession. The genesis block of the bitcoin blockchain has this following line of text within it.
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” (source)
Nakamoto himself has also commented on the problems with the traditional banking system in general.
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts.” (source)
It is in this spirit that blockchain technology was invented, as an alternative to the traditional banking system. Cryptocurrency has yet to become a necessity to many of us living in the developed world. However, speak to someone from Venezuela or China with there strict currency controls or hyper inflation and you will begin to realise this technology has much more to offer in times of real crisis.
For many of us this necessity has not arrived and thankfully so. However, we have yet to see how Bitcoin and the wider cryptocurrency market will react to an economic contraction.
On average these occur every 95 months or 7.9 years there with the last being triggered by the collapse of the previously mentioned housing bubble of 2007/08. It is anyone’s guess as to what will trigger the next recession but if history has anything to show, we are well overdue for another contraction.
With Bitcoin now being marketed as a store of value it will be interesting to see how it reacts during a period of economic uncertainty.
For the longest time there has been no out for those involved in the traditional global banking system, however with bitcoin the fire exit is thrown wide open.