BitMex, Others Back Bitcoin’s Case as Hedge Against Looming Recession
Everyone knows the shift is upon us hence central bankers and politicians will throw all of their tools at this problem, sates the CEO of BitMEX exchange in his latest post on a looming reset in the global economy.
In the wake of the coronavirus outbreak and its attendant impact on the global economy which has seen many countries introduce stimulus packages to ease the effect of the setback on their respective economies, Arthur Hayes summarizes how he expects things to turn out in the next decade:
“I have no idea on timing, but the strong USD will break the back of the global economy and force a reset,” he notes.
The consequences of COVID-19 are expected to exceed that of the 2008 recession, as well as the Great Depression, and global economies are facing unprecedented and uncertain times. The notion of a cryptocurrency like Bitcoin having its shine has been thrown around for a while but nothing concrete has emerged. Yet, believers like Hayes continue to be optimistic that the printing of money to monetize government debt – the U.S. in this case since “all raw commodities are priced in dollars” – will see the dollar craters and inflation rampant hence his end of 2020 price target for Bitcoin is $20,000.
“And I will reiterate, that is inflationary because more fiat money will chase a flat to declining supply of real goods and labour. There are only two things to own during the transition to whatever the new system is, and that is gold and bitcoin.”
Pointing out the hidden quote in the Bitcoin genesis block: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” and why it matters now, Nicholas Pelecanos, Head of Trading at NEM Ventures, suggests that the creation of Bitcoin is not incidental to financial crises but a direct response to the 2008 financial crash and failings of the global financial system.
“As a global recession or even depression looms, I’m more bullish on Bitcoin and cryptocurrencies than ever. Unlimited QE, unserviceable global debt, a failing monetary system and negative interest rates all at a time where society, globally is moving away from cash. This is precisely what Bitcoin was designed to hedge against…More importantly than being a safe haven, cryptocurrencies are an uncorrelated asset class. This alone can attract a lot of capital in times of uncertainty and with a total market capitalization of $200bn. It won’t take much capital inflow for the price to rapidly climb.”
The idea that digital assets and cryptocurrencies like Bitcoin are a safe haven seems to have gone out of the window especially with the volatility and huge dips, going the way of other assets. However, Ashish Singhal, Co-founder of CRUXPay and Coinswitch.co, thinks this is normal at the onset of a recession due to panic as all fundamentals are lost and irrationality creeps in. A massive sell off could bring a decline in asset value and profits might further lower the prices of cryptocurrencies but not an indication of loss in their inherent value.
“But the underlying value of cryptocurrencies doesn’t lose value during a recession; in fact, it gets even stronger. A global recession is a defining moment for cryptocurrencies. The long-touted “bitcoin is a safe haven” is put to the test during a recession. A recession forces governments worldwide to introduce measures to ease the downturn, which will have adverse economic effects for years to come. Cryptocurrencies are inherently designed to be hedged against such implications. This makes an excellent case in favour of cryptocurrencies.”
Singhal touts the underlying value of cryptocurrencies as defined by decentralization and mathematical stability to hold them strongly even in the worst recessions thus making cryptocurrencies be “the choice of investment during such economic turmoil.”