Inflations Won't Make Bitcoin Moon; Bailouts Will

According to social media, Coronavirus-related money-printing will send bitcoin’s price to the moon. “BRRRR” go the machines, they say. The BRRRR meme is strong, but this financial panic will take a while to play out, with uncertain consequences for all of us. I would not bet on inflation, though we may get it.

If you’re going to bet on anything, bet on taxpayer-funded bailouts of banks and corporations. Those actions will boost bitcoin’s fortunes far more than inflation will.

Give it away, don’t print it

While nobody knows whether government interventions will get economies moving again, we know some businesses, banks, and governments will run out of money.

As such, you can expect bailouts.

Yes, 2008-style bailouts, where governments give away your tax money to banks and corporations. It’s a feature of the U.S. Coronavirus relief bill and already happening to hedge funds.

Bailouts tend to piss people off and undermine trust in institutions like Wall Street and the government.

We saw this reaction during the 1930s and in the first few years after the 2008 financial crisis. While nobody should want to go back to upheaval the 1930s, we might get something similar to the post-2008 rage that spawned the Occupy Wall Street movement and various reactions to the European debt crisis.

During the Great Depression and the Great Recession, we had only one financial system. We had to accept it or overthrow it.

Now, we have another option: cryptocurrency.

Don’t underestimate the potential for this financial crisis to spur people into buying crypto and building businesses around crypto-based products, services, and processes. People might get so angry that they look for an “out” that doesn’t involve the banks, governments, and corporations.

Crypto fits the bill.

Fed up with the bullshit

Imagine seeing your government throw “ an infinite amount of cash “ at corporations and financial firms while giving you a $1,200 check or a restructured loan that barely covers your needs.

Even if you think it’s fair and necessary for the government to rescue the biggest employers and asset-holders, many others don’t.

At what point will people decide to stop giving their money to corporations that screw up, get bailed out, yet still lay off their workers? When will they get sick of dealing with banks that threaten small businesses with bankruptcy despite getting an unlimited supply of money from the government?

Instead of buying stocks or taking out loans, people may switch to DeFi platforms while adding bitcoin or some other cryptocurrency as a portfolio asset.

Entrepreneurs may start their own cryptocurrency or blockchain business instead of working for a Wall Street firm or begging for money from venture capitalists.

Businesses may decide to try a blockchain-based payment platform instead of a platform that relies on banks.

All of the benefits, none of the costs

Financial systems need to do one thing: work.

With cryptocurrency, that is guaranteed. Tokens ensure everybody follows the same rules and the blockchain settles all transactions exactly as expected.

You can program rules, protocols, and governance into the blockchain. Developers can create new products and services based on those embedded features.

While you may not like those results, you always know you get those results. Math doesn’t fail. Nobody needs to bail out a computer program.

As a result, you can safely transact with millions of people who you have never met, with whom you have no relationship, who live in a country with different laws and regulations.

No government needed, no banks necessary, and no Wall Street firm getting in your way.

Save the traditional financial system before we abandon it?

Am I saying the cryptocurrency industry is mature enough to support a wholesale switch from traditional finance to crypto?

No, not even close.

Only a handful of cryptocurrencies can handle the volume necessary to replace current systems and none of them can compete with bitcoin on security and level of adoption.

And, while bitcoin’s side chains and second-layer solutions can theoretically handle more volume than traditional financial networks, there are real-world kinks to resolve before we can use them for actual commerce.

Still, the technology has advanced far enough.

Devvio, JP Morgan, and other businesses already use cryptocurrency as part of their services to customers. Lightning Labs is developing a payment platform that can compete with Visa. Bakkt raised $300 million to launch merchant services that integrate with its global cryptocurrency marketplace.

Microsoft is developing a decentralized ID product using bitcoin’s blockchain. Earlier this year, Ernst & Young unveiled its Baseline protocol for private business transactions on the ethereum blockchain.

IBM still has World Wire. Lots of smaller projects and developers continue working on the platforms and infrastructure necessary to make it easy for people to use cryptocurrency for real-world purposes.

If the global economy can recover, governments may have just planted the seeds for a massive migration of money and talent into cryptocurrency — not because crypto is great, but because the legacy system is not.

Mark Helfman is editor of Crypto is Easy and a top writer on Medium for bitcoin and investing topics. His book, Consensusland, explores the social, cultural, and business challenges of a fictional country that runs on cryptocurrency. In a past life, he worked for U.S. House Speaker Nancy Pelosi.

Originally published at https://markhelfman.com on March 31, 2020.