A Fork in the Road: How Will the Recession Affect Crypto?
The more positive way of looking at LUNA, and other crypto disasters in general, is that these sorts of systemic problems eventually all get caught as the foundation falls underneath.
In fiat, these sorts of issues get covered up, bailed-out, and hidden behind tools like quantitative easing as people get pushed out into the streets through inflation and housing scarcity and such. It's a more socially acceptable form of exploitation in a way - with the worst of them actually dipping into taxpayer money and public funds. Just ask the exploited classes about this stuff - they know all about it.
Keep in mind that Bernie Madoff was able to get away with his racket for 17 years because the market generally always kept on going up. When the recession hits, we're going to start seeing the ugly undersides of what's been going on in fiat, too. Ponzi schemes are not exclusive to crypto, and there's a lot of pot calling the kettle black arguments floating around, especially in finance. The guilty conscience often attacks what they themselves are doing.
The big question for crypto holders is what happens when the recession hits - there's primarily two different types of outlooks in the space right now.
The pessimistic outlook is that when fiat goes down, so does crypto, as it has typically done for most of its runs.
The optimistic outlook is that Bitcoin itself was born out of the recession and controversy of 2008, where it has experienced the biggest of its returns.
Both are true, but how 2022 turns out will largely depend on how secure people are feeling about their money in general.
A couple of things that make the economy of the US today unprecedented, compared to recessions in the past:
- A historic 8%+ inflation rate which has not yet shown signs of slowing down.
- Interest rates will likely be raised to the highest it's been in recent history (possibly 3%, but likely higher).
- A massive 36% increase in money supply since 2020, mostly gone to government spending relating to COVID.
- High costs of living and new remote work options driving record amounts of people out of the cities (where the housing prices are the most inflated).
- The US government has been in massive debt for a while and have been using "fixes" like quantitative easing to kick the can down the road. It's been relying on money printing and taxing capital gains in order to pay off its bills but if the economy goes into a recession, that will no longer be an option.
Some people say that this is the "day of reckoning" for the US economy coming that has long been overdue. Which way will the tides swing for crypto and Web3? Time will tell.
In fiat, these sorts of issues get covered up, bailed-out, and hidden behind tools like quantitative easing as people get pushed out into the streets through inflation and housing scarcity and such. It's a more socially acceptable form of exploitation in a way - with the worst of them actually dipping into taxpayer money and public funds. Just ask the exploited classes about this stuff - they know all about it.
Keep in mind that Bernie Madoff was able to get away with his racket for 17 years because the market generally always kept on going up. When the recession hits, we're going to start seeing the ugly undersides of what's been going on in fiat, too. Ponzi schemes are not exclusive to crypto, and there's a lot of pot calling the kettle black arguments floating around, especially in finance. The guilty conscience often attacks what they themselves are doing.
The big question for crypto holders is what happens when the recession hits - there's primarily two different types of outlooks in the space right now.
The pessimistic outlook is that when fiat goes down, so does crypto, as it has typically done for most of its runs.
The optimistic outlook is that Bitcoin itself was born out of the recession and controversy of 2008, where it has experienced the biggest of its returns.
Both are true, but how 2022 turns out will largely depend on how secure people are feeling about their money in general.
A couple of things that make the economy of the US today unprecedented, compared to recessions in the past:
- A historic 8%+ inflation rate which has not yet shown signs of slowing down.
- Interest rates will likely be raised to the highest it's been in recent history (possibly 3%, but likely higher).
- A massive 36% increase in money supply since 2020, mostly gone to government spending relating to COVID.
- High costs of living and new remote work options driving record amounts of people out of the cities (where the housing prices are the most inflated).
- The US government has been in massive debt for a while and have been using "fixes" like quantitative easing to kick the can down the road. It's been relying on money printing and taxing capital gains in order to pay off its bills but if the economy goes into a recession, that will no longer be an option.
Some people say that this is the "day of reckoning" for the US economy coming that has long been overdue. Which way will the tides swing for crypto and Web3? Time will tell.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.