Will Covid-19 crisis finally drive a Bitcoin revolution? - Jim Duffy

Over ten years ago a bunch of folks got together to create a new currency, or so the story goes. Others say it was one man reacting to the 2008 financial crash.

Bitcoin's appeal lies in its fixed circulation, says Duffy

Whatever version of one chooses to believe something interesting was created: Bitcoin. It took five years to become more mainstream as the early adopters shouted from the rooftops. This was new, novel, demonstrably different, a game changer. Fiat currency, that’s pounds, dollars and euros, would burn itself out and Bitcoin would replace it. I’m not sure the dream is becoming the reality.

The 2008 financial crash hit the markets and our lives hard. Traders lost out and stocks fell sharply. Banks collapsed. The gearing, leverage and balances sheets were all a bit helter-skelter built on debt. Debt that some didn’t even know about. It resulted in governments stepping in to save the whole monetary system.

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Gordon Brown did well to save the Royal Bank of Scotland. He had to. This bank was so much part of the system that to let it flounder would have been financial suicide for the UK, not to mention us, its customers. It was the right decision and thankfully this Scottish bank has prospered.

But, here we are again as the economy teeters. Banks appear stronger after years of stress tests. However, the big bank in Threadneadle Street is still having to print money. Woohoo for Bitcoin then? It seems not.

Call it quantitative easing, printing money, fiscal stimulus or whatever, the bottom line is that countries like the UK and the US are operating the printing presses to save the economic world we live in. Billions will be made available to the system that is shuddering, but not yet halted.

Money that doesn’t exist. It is not sitting in a big pile in vaults beneath the Bank of England nor is it being held in gold bars at an unknown location.

This is fresh air money that central banks can simply print when they need to. The ramifications of which we can live with later as just now it is vital to keep the whole economic, social and political system ticking over. Again, while all this takes place it throws massive weight behind the Bitcoin argument.

This argument being that our whole financial system is built quite literally on fresh air. I don’t think that is disputable now and while I am no economist, it is hard to argue with the thought that we are deep in the brown stuff and only printing money will keep us from drowning. So, this being the context across the globe, why has the Bitcoin revolution not kicked in?

The answer is not a complicated one, but one the techies, crypto heads and bonanza chasers are afraid to face; Bitcoin is also fresh air. But, unlike the central banks that can print money, its circulation is fixed. This was supposed to be the ace in its pack. Like gold, there would only ever be a fixed amount available and people would flock to it in times of financial calamity. Like now.

Yet Bitcoin has failed to impress and looks lost and fragile as it peaks and troughs, having lost 33 per cent of its “value” in the last month. That figure may look familiar as it sums up the losses of the big indices across the globe. So much for digital gold, then?

There will be many purists and keyboard warriors who will reel at such an assertion. For them, this cryptocurrency is still in its infancy and adoption is not mainstream yet. For them, governments in the US, India and China have tried for years to kill off Bitcoin as they worry about their own currencies. So, it has not had a fair crack at the financial whip – in their eyes.

This may be the case, certainly neither Russia nor the US are not running out the door to buy Bitcoin just now - just in case. So, it is just sitting there on global exchanges making day traders money, but with no real impetus to grow.

Here we are again in another deep financial crisis, this time caused by a pandemic, but Bitcoin has failed to show up. It may yet have its day, but it doesn’t look like anytime soon.

– Jim Duffy MBE, Create Special


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