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The 2008 financial crisis that came about from a mortgage default-driven housing market collapse still lives strong in the memory for most — especially Bitcoiners. It was this crisis that inspired Satoshi Nakamoto to create as a hedge against similar catastrophes from centralized banking systems in the future.
Some 12 years later the world is once again gripped by the beginnings of another financial crisis — this time sparked by the onset of the COVID-19 pandemic. However, this outbreak was the spark of a recession that had been building for some time.
The recession and its long-term effects are only just starting to become visible, but with firms in the US being forced to lay off and furlough hundreds of thousands of workers, the economy is taking such a battering that even an ‘infinite amount of cash’ being printed by the US Federal Reserve will not be enough to hold it up.
Bloomberg is now reporting that mortgage defaults could pile up at a rate that would make the 2008 housing market collapse look small as lenders prepare for the ‘biggest wave of delinquencies in history.’
It would appear as if the incident that saw Bitcoin come to be is repeating itself, but is the cryptocurrency ready to mount a credible challenge to be a viable alternative with only 10 years’ experience behind its name?
The U.S. economy is in dire straits. 10 million people have filed jobless claims which allow for them to skip mortgage payments for 180 days at a time on federally backed mortgages and avoid penalties and further hits to their credit scores. This equates to 30 percent of Americans — 15 million households — that could default if the economy stays on lockdown.
‘This is an unprecedented event,’ said Susan Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania. [Bloomberg] “The great financial crisis happened over a number of years — this is happening in a matter of months — a matter of weeks.”
The outcome of this new global recession, which looks to be a growing monster, is yet to be realized. For Bitcoin believers, the last recession brought about the blockchain and cryptocurrency revolution, but with this new crisis looming, can Bitcoin deliver on its early promises?
It would be overly zealous to say that Bitcoin has grown to be an alternative financial system that can hold up in the face of an economic collapse. The coin has moved more towards being a store of value as greed drives its designation. For this reason, the most practical use of Bitcoin in a time where fiat is difficult to come by could be selling it to survive.
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