Apr 4, 2020Are We Better Equipped for Financial Uncertainty Thanks to Crypto?

Everyone is panicking about potential impending financial doom – but this time around, things will be different.

With almost everyone in the world talking about the consequences of the ongoing viral outbreak, I think it’s time that we explore a few of the possible negative outcomes that could affect you financially – and how you might be able to mitigate or prevent some of that damage by utilizing the power of cryptocurrencies like PIVX.

During the last financial crisis in 2008, the United States saw stock markets plunge and real estate prices evaporate. Greece was hit particularly hard. So much so that the government even took money directly out of people’s bank accounts. What we are seeing now in the US is a process known as quantitative easing where the Federal Reserve starts printing money hand over fist, primarily to give loans to big corporations that were too financially irresponsible to be prepared for a major financial catastrophe.

While the 2008 outbreak of financial chaos happened before the age of Bitcoin, this time things are going to be different. We as individuals have the power to store our assets and value in something that is beyond the control of corporate cash grabs or fiat currency printing gone mad. Since we are only in the early days of the current crisis, no one will know exactly how long this will last or for how long the impact will be felt. Some might argue that the 2008 financial crisis is still being felt to this day, while others may argue that at the very least it was at the forefront of people’s minds until at least 2016. So, let’s take a look at how we can use the power of cryptocurrency and private money to power through this crisis and come out the other side potentially stronger than before.

The Dangers of Quantitative Easing

Since the earliest days of Bitcoin, Satoshi Nakamoto argued that one of the biggest weaknesses of national fiat currencies is that once a government feels threatened, it is incentivized to start printing cash as quickly as possible. In some cases, this can potentially have a positive effect assuming that it is managed smartly and done with a clear intent in mind.

For those unfamiliar, the reason why printing more money is dangerous is that the more money that gets added to an economy, the less each unit of that money is worth. Recently, members of the US government have been discussing sending checks to every American family. In the short term, this could be great, but it will likely have some unintended long-term consequences.

Let’s use cryptocurrency as an example. Suppose that someone was to create a new cryptocurrency and started sending it out to everyone for free. Odds are that this cryptocurrency would end up being worth nothing, or next to nothing. For those of us who have been in the crypto world for at least a few years, you will probably remember during the ICO boom getting dozens or even hundreds of unsolicited airdrops into your Ethereum wallet. It’s likely you have countless Ethereum tokens that are currently worth nothing as they came from projects that have since failed.

While there may have been many reasons for a project’s failure, it’s simple to understand that if you give something away for free, that means it’s not worth anything. There are exceptions to this, but generally speaking, something given away is not something worth buying or investing in. US dollars are currently valuable. However, if a crisis leads the US government to print out endless reams of paper money, this will inevitably reduce the value of the US dollar in both the short and long-term.

What does this mean for us? Simply put, it would be wise to put some of your wealth or value into assets that cannot be printed or produced in an unlimited manner. PIVX, for example, has a completely predictable minting process as well as a means by which the supply is reduced over time (if you didn’t know, all PIVX transaction fees are permanently burned and not given to miners). Of course, this doesn’t mean you should put all of your money in crypto. It would be wise to diversify your holdings so that if fiat currencies drop, your crypto holdings have a chance of not dropping, or perhaps even going up in value over time. This isn’t financial advice, but it is a widely held and proven axiom that diversification is a reliable strategy to protect your assets in times of uncertainty.

The Need for Privacy is Only Growing

As mentioned above, during the Greek financial crisis, the Greek government gave everyone’s bank accounts an unwanted ‘haircut’ from which there was no escape, and no warning. This can happen when you keep your value stored in instruments that are susceptible to manipulation through acts of corporations or governments. Cryptocurrencies, on the other hand, are not subject to any outside forces. They cannot be claimed, appropriated, be subject to eminent domain, and so on. Not even the creators of the cryptocurrency have the power to take it away from you. Case in point, Bitcoin exchanges saw a large increase in volume during this crisis, the largest percentage of the increase came from customers in Greece.

In these uncertain times we are in, privacy in a pure, mathematical sense is something that cannot be overvalued. It is entirely possible for banks and governments to conduct blockchain analysis and other forensic means of determining who owns what on public blockchains like Bitcoin and Ethereum use. So far, blockchain analysis seems to have only been used to go after outright criminals, money launderers and tax cheats. However, if a country has a scary enough financial crisis, it’s reasonable to assume that under the right conditions, you might get a letter in your mailbox or a person knocking on your door demanding forfeiture of your assets.

As far as we know this hasn’t happened before, but it’s been a long time since we’ve had a pandemic threat like the one we are seeing today. A lot of new ground is going to be broken as a result of this trial on humanity and its societies. The fact is no one knows exactly what’s going to happen, which means that being cautious and prepared for the unexpected could be a wise choice. 

Diversify and be Patient

The purpose of this post isn’t to try to scare you or tell you that cryptocurrencies like PIVX are the ultimate silver bullet to everything you’re worried about. On the contrary, my goal here is to simply remind you that this time around things are going to be very different than what happened in 2008 in the US and 2015 in Greece. We as a global society are much better equipped to handle financial uncertainty.

Prior to the introduction of Bitcoin, the only options for financial instruments to protect our value were limited to things like precious metals, gems, and other more esoteric means of storing value that are difficult to buy, store and trade. All that has changed now. This time around, holding onto some private and anonymous cryptocurrency just might be one possible way to help protect you and your family from the unknown.

PIVX Prose