Crypto Chaos and Economic Failure
Well 2022 has certainly seen its share of crypto chaos and calamity.
As we near the end of 2022 and head toward the Christmas and New Year Festive Season here in Australia. Then in Q1 2023 the Chinese New Year celebrations. There will be many reflecting the year that was and the year to come.
They will possibly make some New Years Resolutions. What might those be?
“I'm done with Crypto"
”I'm going to keep buying the dip”
”if only I had enough cash to keepbuying the new dips"
”I'm changing my approach"
"I'm going to educate myself and find some more reliable news and information sources"
“I'm going to forget about crypto for a bit and get some solid sleep"
Many will be eager to put 2022 behind them, certainly Sam Bankman Freid will be one of those. Not to forget the many that have been affected by the actions of the few!
While it has certainly been a very challenging year it has also been one of huge change and potential massive upsides in years to come. In the short history of blockchain and the crypto space we have certainly seen some significant moments this year. With challenges that have been unprecedented in this space, on this scale and so far reaching. These are all signs of an emerging but still very immature crypto space that still has so much growth and development to offer.
The events of this year has in some ways set crypto back a number of years. However, it has also exposed some opportunities for change that has the capacity to propel crypto forward. Only the strong survive and we will see the strong and robust, proven cryptocurrencies rise as well as newer projects that are well structured, well thought out and well managed.
Similarly with regard to exchanges, we will see some big changes to protocols and governance of exchanges. And likely a slow reaction from retail to regain trust in these exchanges and rightly so.
We have seen a massive uptake of hardware wallets in the past week and quite possibly will see some structural changes to exchanges where there are more security measures and privacy keys attached to certain products and holdings.
The challenges we have all faced and likely still have to face in the short term has tested our nerve. Some of this was necessary, as we needed a rebalance after the super inflative period we have been through in the past few years. With the Covid policies, the Quantative Easing since 2008's GFC, ridiculous amounts of printed cash and out of control global debt.
During the past 14 years
US printed or injected $13 Trillion Dollars
UK injected $500 Billion during Covid
Australia printed around a similar amount as the UK with close to $500 Billion
last two years the US Federal Reserve has printed 80% of all US dollars in existence
Australia's supply of "Broad Money" has increased by $624 Billion.
I haven't even touched on other major countries and their actions during Covid and since the "GFC" but you can see from just the figures above how much of an impact the Covid era, GFC and the actions of Governments and the Reserve Banks had on influencing the global economic situation we are in now.
This extra injection of cash flowed into the markets. You will see the trends of the S&P500, ASX 200, BTC, ETH and the total market cap of cryptocurrencies and how those figures soared due to the sheer volume of cash that was injected into the system.
The funny thing is that the cash they created didn't even exist and is not really backed by anything (and people think crypto is bad and refer to it as internet play money). If our Fiat dollars are not backed by anything
what gives them value
what makes them legal tender
what makes them any different to Bitcoin or Ethereum?
At least BTC and ETH like other major cryptocurrencies are directly mined and verified in the process called Proof of Work.
Well ETH used to be Proof of Work but is now Proof of Stake. However most ETH in circulation has come from the Proof of Work. Up until the Merge.
At least with digital currency, whether Proof of work or Proof of Stake is a direct reward for effort and it verified. These major crypto's are tied to projects with use cases and fully verified with a stringent process that confirms the blockchain and the transactions. Rather than someone simply
typing into a ledger $500 Billion
adding it to the balance sheet
purchasing Bonds with it and
voila it's in the federal bank account or the accounts of the big banks.
It used to be the Gold standard, then the Petrodollar, now I am not sure what standard the governments work to when they are able to rack up insane amounts of debt, that is simply not realistic to pay back?
America's national debt over the past 100 years has grown from $410 Billion in 1922 to 30.9 Trillion in 2022
Australia's National Debt is nearing $1Trillion and in June 2022 was $895 Billion Dollars
In December 2008 Australia's National Debt was only $115 Billion
The UK's National Debt is $1.8 Trillion Pounds Stirling which is the highest Government Debt in 60 years and up from $7.4 Billion Pounds in 1919.
We are certainly living in unprecedented times and one where economies are stretched and a revolution of economics needs to occur.
What will crypto's role be in all this?
We are seeing increasing use of crypto globally
banks are now using blockchain tech and moving away from SWIFT transactions and toward Ripple and similar blockchain systems applying ISO200022 standard.
an increasing interest in banks working on issuing CBDC's (Central Bank Digital Currencies)
increasing push toward digital in many areas of society and industry.
Where does this leave crypto?
Where does this leave the decentralized nature of crypto?
I am confident that as we see an increasing awareness of crypto and an increasing use of crypto and blockchain tech, It will bode well for the major crypto coins with sound use cases and networks. While there may become more centralized crypto exchanges, there will always be decentralized crypto and decentralized exchanges.
As there are fewer coins available or fewer to mine with many of these coins, there will be an increase in value.
We may be some way from the bottom of the market yet and we may not see this until Q2 2023. But we will see a steady rise again as confidence is restored. People will realize that the supply is finite on some of these coins and mining difficulty will increase. This will propel increased value in the coins.
Then with other coins, as the usage increases and the networks build we will also see an increase in value. We will see a more natural inflationary price curve and cycle in the coming years but it will take some time to recover the market and the global economy. I firmly believe though that crypto will play a part in this global economic recovery. Centralized exchanges managed well can assist to drive the price of cryptocurrencies upward and we saw this with the increase in centralized exchanges in the past few years. They definitely assisted bringing crypto to the mainstream and drove the price of each coin higher. There is certainly a place for centralized exchanges as long as they are managed well. This will be the challenge moving forward.
But until then Metamining Australia will keep on mining our key coins and building our wallet balances with coin holdings......
The above is an edited excerpt from MetaminingAustralia’s latest blog. Written by Rusty Rigs. Here is the link to the full unedited blog.
Metamining Australia has given permission to B18CCS to reproduce and edit Rusty’s blogs under our evolving Collaborative Partnership.
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