Why Volatility of Fiat Currency + Financial Crisis will Give Rise to Bitcoin + Crypto
The nation of Turkey’s currency is currently in a free fall, trading at an all time low, 6.4 lira against the US dollar, down over 70% for the year. The reason- banks pumping massive dollar denominated debts into emerging markets at super low interest rates. The economist in the column above stated that as Turkey’s […]
The nation of Turkey’s currency is currently in a free fall, trading at an all time low, 6.4 lira against the US dollar, down over 70% for the year. The reason- banks pumping massive dollar denominated debts into emerging markets at super low interest rates.
The economist in the column above stated that as Turkey’s economy is more reliant on financing from foreign investors, it struck him as similar to what had happened to Thailand in the years before the Asian financial crisis in 1997.
First of all, that is pattern recognition, although it took 5 years to come to fruition from his original prediction that the lira would tank, we should all step back, say “nice,” and scratch our heads and ponder whether we can recognize future patterns which might lead to enriching ourselves.
First thoughts, in terms of markets and nations in general; expanding debt, raises spending, which raises incomes, until the debt payments suffocate new spending, causing the economic machine to reverse itself. As asset prices decrease, people have less collateral to put-up, the banks stop lending, and asset prices fall dramatically. This is what happened in the 2008 crash.
While Turkey might not be a big enough of a lever to repeat this cycle, one thing that I note is the more that currencies like the lira fluctuate, or drop off the face of the earth like in Venezuela or Zimbabwe (where if you held notes of any type their current value is as toilet paper,) the more people will be attracted to cryptocurrencies, specifically Bitcoin which is still, at this moment, king of the crypto world. The fact that it has a fixed supply means that that corrupt governments can’t devalue your savings by printing more and more of it.
The more we go through gyrations such as what we currently have with the Turkish lira, the more human beings might look for stability and be driven into the arms of bitcoin/other crypto currencies.
Warren Buffett says that bitcoin is a total bubble, and he’s been right about, well, tons of stuff. But in this case there is a pretty solid reason why people around the world would seek shelter in crypto. Potentially, it might not is not just a collectible internet address to brag about as Mark Cuban predicts.