Apr 30, 2020
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Cryptocurrencies and economic madness

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By Ksenia Beloglazova on The Capital

What is your view regarding cryptocurrency and this current economic craziness going on?”

A few days ago, a friend of mine asked me a puzzling question:

“What is your view regarding cryptocurrency and this current economic craziness going on?”

What can I say? The quarantine, which affected 2/3 of the population of our planet, has already plunged the whole world into its deepest political and financial crisis in decades. But I’m not sure that what is happening in the economy is crazy, I’m not even sure that it is a disaster. This is a crisis, perhaps very deep. How long is it going to last? I don’t know. This is not a war, no production facilities are destroyed, the infrastructure is not destroyed. On top of that, the oil has become cheap. It seems to me that after quarantine ends, life can quickly return to its usual course, and humanity can return to its usual pattern of consumption. Maybe I am right, maybe not. Was the quarantine necessary? I am not a virologist, not a doctor, so I do not know. I did not have to choose between bad and very bad — between the increase in the incidence of COVID-19, which leads to mortality increase and the economic crisis, which, most likely, will also take many lives.

But how will the current situation affect cryptocurrencies and the cryptocurrency market?

In the short term, I think that the cryptocurrency market as a whole will grow, primarily due to the price increase of two main cryptocurrencies — Bitcoin and Ethereum. The reason why I am sure of this is simple — both the US and the EU will throw a huge amount of new dollars and euros into the market in one form or another to eliminate the crisis. Trillions of new dollars and euro will appear on the market. Inevitably, a significant amount of this money will end up in the cryptocurrency market. Given the size of this market today (about $ 200 billion), we can safely expect doubling of this market.

As a medium-term forecast, I can predict the increasing influence of bitcoin in third world countries as a universal means to survive hyperinflation. For example, in April, we once again saw this trend in Argentina.

While everyone was preoccupied with coronavirus, the April 2020 most important development happened in the cryptocurrency market: the launch of China’s national digital currency — DCEP, the so-called digital renminbi. I cannot confidently say whether China has plans for the global expansion of DCEP, or it will be used only in China. It is important that the digital renminbi has the ability to support payments without being connected to the network during the payment and without being connected to a bank account. This means that any person in the world will have access to the Chinese digital currency. But at the same time, DCEP operates in a centralized network, and the Central Bank of China has complete control over it. In theory, DCEP can claim to be the reserve currency for private savings and significantly change the balance in the global currency market in favor of China.

Currently, the biggest problem in the cryptocurrency market is the lack of direct interpersonal communication due to quarantine. Otherwise, there are almost no changes:

· Cryptocurrencies were high-risk investments, and they remain high-risk investments.

· The main difficulty of crypto projects is the inability to generate profits and not the inability to attract investments.

· The successful DeFi Projects still grow and develop.

The Capital

Cryptocurrencies and economic madness was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.


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