Andreas Antonopoulos, a popular Bitcoin author and evangelist, is questioning the notion that an economic disaster could one day trigger an immediate boom in the Bitcoin and crypto markets.
Antonopoulos tells Laura Shin on the Unchained Podcast that BTC will drop in line with other assets when the global economy suffers a big setback.
“The disaster glee that you see in some Bitcoin circles where it’s like ‘I hope the economy crashes because then Bitcoin’s going to the moon and I’ll have bags.’ That disaster romanticism is both creepy, as well as irrational, because, in the short term, exactly the opposite happens. In the short term Bitcoin does get sold off just as hard as the other assets and probably harder, because it has this extreme volatility. There are no mechanisms to stop it from dropping just as hard.”
Antonopoulos says an “unprecedented injection of global liquidity” across the global economy over the past 10 years has correlated more and more assets to whatever the current degree of stimulus is being promoted by the U.S. Federal Reserve.
“It creates these weird phenomena like ‘good news is bad news’ because it will lead to less stimulus, and ‘bad news is good news’ because it will lead to more stimulus…
Investors who have undergone this battle to find yield and keep looking in dustier and dustier corners of their portfolio to find yield because they can’t generate yield because money is free and everyone’s chasing yield and there’s too much money out there, they will use Bitcoin and other crypto assets at various times to chase yield, and that does correlate Bitcoin closer to all of the other assets because it’s responding to the same incentives.”
Shin asked both Antonopoulos and Dan Held, the growth lead at the Kraken Digital Asset Exchange, about “Black Thursday” in March, when, in the midst of the coronavirus panic, Bitcoin plummeted in value along with traditional assets. The event caused many analysts to question Bitcoin’s ability to serve a store-of-value asset like gold.
Held, however, disagrees that Bitcoin’s short-term plunge actually cast any doubt on its merits as digital gold.
“That was a liquidity crunch, and we saw gold sell off tremendously, and gold is a 4000-year-old store of value. It’s one of the oldest stores of value still in existence that humankind uses… Because gold sold off, does that make gold a poor store of value? No. I think in a liquidity crunch everyone is selling everything they can get their hands on to beat their margin calls. There were a series of cascading margin calls that essentially crunched and crunched the market…
What we’ve seen in 2008 and now is that, after that moment, months and years later, then the store-of-value assets like gold start to perform, as people start to price in inflation concerns… I don’t think we’re going to see that impact on Bitcoin’s price materially until 6-12 months from now.”