We have had Tulip Mania, the South Sea Bubble, the Dot-Com Crash, and the 2008 Housing bubble. Now, we are potentially heading towards the ‘Everything Bubble’ — but does this include Bitcoin?
The global economy is currently on tenterhooks. Central banks and the United States Federal Reserve are doing all they can to encourage spending and stimulate growth — but the overwhelming sentiment is that we are in for some sort of recession.
In fact, the recession may occur after the “Everything Bubble” pops. This recession has been building since the last bubble (housing) in 2008. Following that crisis, the Federal Reserve’s quantitative easing strategy, which pumped $3.7 trillion easy money into the economy, did nothing for the true economy but push up the price of financial assets — specifically, stocks and bonds.
Where does Bitcoin fit into this ‘Everything Bubble?’ Is the decentralized peer-to-peer financial system precluded from the impending disaster spawned from central banks and government financial policies? Is Bitcoin the savior and hedge for when a potential recession hits?
Break Away From the Bankers
The recession and potential ‘Everything Bubble’ already has analysts and financiers wagging their tongues in preparation. An explanation from Nick Giambruno of the Everything Bubble is capped off by advice to buy gold. His reasoning for investing in the precious metal ahead of a financial decline is that “gold is like kryptonite to central bankers.” He continued:
Central banks can’t create wealth or anything of value. The only thing they can do is manipulate the money supply. And that always has destructive effects. When the Everything Bubble ‘pops,’ likely as a result of a crash in corporate debt, you’ll want to make sure all of your wealth isn’t trapped in stocks and bonds.
Giambruno’s advice is hardly groundbreaking and rather predictable. In fact, the gold price has risen over 25 percent in the last six months — indicating that it is probably not part of ‘Everything’ in the Everything Bubble.
Bitcoin Is Even More Immune
It has already been suggested that Bitcoin may move in a negative correlation to the global economy should a recession hit and government policy fails to prop things up. BTC, as a decentralized and non-controlled financial system, cannot be manipulated by monetary policy.
Bitcoin has been designed to be anti-inflationary — with its limited and ever-shrinking supply — and, based on macroeconomic principles, it should continue to increase in value.
Bitcoin’s non-reliance on government and central bankers makes it that much more immune to a bubble that is set to pop most traditional and institutional financial systems. If gold is immune to this bubble, Bitcoin is (potentially) even more so.
Do you think Bitcoin will be affected by the Everything Bubble — or will the decentralized cryptocurrency actually benefit from a bubble that pops stocks, bonds, and other government-based financial systems? Let us know what you think!