What Will Happen With Cryptocurrencies in the Next Economic Crisis

James Walton
By James Walton February 26, 2018 09:13

What Will Happen With Cryptocurrencies in the Next Economic Crisis

The Preppers Crypto Conundrum

A completely digital currency that is kept in a digital wallet; a currency that is completely vulnerable to an EMP or power outage; a currency that it is created by the complex world of the blockchain; is there anything more counter-intuitive to a prepper?

When it comes to cryptocurrency there is a level of ignorance, a level of inconvenience and a level of frailty that tends to make us very leery.

Still, when you watch a currency born out of some very brilliant economic principles that are opposed to preppers’ biggest problems with fiat, like the fact that there will only ever be 21 million bitcoins produced, you cannot help but take notice. In other words, there is no way you can go the way of the U.S Government and “print” more Bitcoins.

When you watch a single bitcoin go from three hundred dollars to over $19,000, well, that’s a lotta 5.56 ammo! In fact, on another note, one bitcoin could have bought you that modest emergency bunker you have been after.

Since that meteoric rise we have watched the currency correct itself and balance out a bit. For preppers and investors alike, it leaves us all wondering if the time is right to jump into Bitcoin.

Maybe the question we should be asking is:

“What will happen with cryptocurrencies in the next economic crisis?”

We just watched the stock market take a 1,175-point plummet. Many are saying this fall was exacerbated by the fact that so many computers were trading, and they were programmed to dump stocks in such a scenario.

Related: 5 Commitments You Must Make Before the Next American Depression

Still, we all know that there is a day of reckoning coming for all this growth and the bubble of derivatives that is growing out of control. According to Michael Snyder from the Economiccollapseblog.com this micro collapse should be no surprise to anyone.

I cannot stress enough that what happened on Monday is not a surprise.  The only surprise is that it took this long to happen.

Stock valuations need to fall another 40 or 50 percent just to get back to their long-term averages, and whether that happens very rapidly or takes an extended period of time, the truth is that stock valuations will return to those long-term averages.

Unfortunately for us, the central banks have created a bubble of such enormity that it could potentially collapse the entire global financial system when it finally fully bursts. (Source)

The Bankers Trust

On that note I think it’s important we understand that, with the growth of cryptocurrency and today’s incredible access to information, we are seeing the trust in our central banking system falter. If a true financial collapse hits where do we put our trust?

The adoption of these cryptocurrencies could prove to be a viable option for those who want to protect themselves against banks that may attempt to hold money in a bank run situation or, with the help of the government, confiscate it all together.

In 2008, confidence in central banks saved the global economy. But as Mario Draghi said, the bazooka of quantitative easing was fired and a second hit during a crisis would have proved ineffective. The reason is complex and must be clearly explained. Most people are paid in a currency deposited in the bank, because that is where one keeps one’s currency, able to withdraw it at any time. But in the event of an economic crisis, priority is given to the banks, whatever remaining liquidity being for the customers. The reason why there was no bank run in 2008, which would have led to the collapse of the global banking system, lies in the trust that ordinary people continued to place in the financial system, courtesy of what the corporate-controlled media told them. (Source)

So how does a financial collapse look today when the corporate controlled media has lost so much power and influence? What happens when people are being paid in Bitcoins and banks are out of the picture?

Those who store all their money in the banks may not have access to it or worse? What would you do if you woke up to find that your bank has gone on a run and your assets were not accessible?

Related: 50 Tips From the Great Depression

The Peoples Market

There is a sense that these cryptocurrencies and their communities, which are made up of everyday people, will provide a haven for their money if the market, the dollar and the banks all tanked, both in worth and in the court of public opinion.

I spoke with Steven Menking, economic advisor and senior editor at www.ontheobjective.org on the topic of cryptos in a collapse.

Steven offers us three unique scenarios to considerhttp://www.ontheobjective.org but first he offers us a warning:

Any oversimplified analysis about how cryptocurrencies would perform in a crisis should be met with skepticism because of the complexity of the space. There would be many crucial factors of unknown intensity, duration, and correlation. Without being overly technical, there are certain rules of thumb that would apply.”

  1. Flight to quality

In a crisis, people rush from risky assets into assets that are perceived as safe. Often this takes place rapidly as people are attempting to move significant amounts of capital when there isn’t enough liquidity in the market to accommodate it.

For example, if you’re trying to sell 1,000 houses, for instance, and only 5 people are buying, then you will have to offer the houses at remarkably lower prices instantaneously. For the cryptocurrencies, many have actual use cases and should be perceived as safe albeit volatile, but most don’t have existing products, reliable teams, solid networks, robust communities, and real utility.

Those would experience significant outflows. A key variable is whether or not the crisis impacts the dollar. In past crises, people have sold stocks and even bonds and rotated into cash, precious metals, etc. The true test of the cryptocurrencies would be how they perform across an entire market cycle, and my hypothesis is that the best names would do well to the extent that they are perceived as safe and reliable.

  1. Total electrical shutdown

If the crisis is such that the entire electrical grid goes offline forever, then obviously that would eliminate the viability of cryptocurrencies. However, because of the decentralized nature of the blockchain, if even one copy of a cryptocurrency’s underlying blockchain survives the entire history of the distributed ledger can be reproduced when electrical systems come back online. In such a scenario the damage to the human population would be so drastic that we likely wouldn’t care about the value of our investments apart from the extent to which they can help us survive or obtain vital consumable and durable necessities.

  1. Crisis in confidence

Should the extent of the corruption and even evil inside existing institutions be exposed in full view of the public, then the resulting crisis in confidence would look much different than a run of the mill economic downturn or a global cataclysm.

 This is the scenario where cryptocurrencies would likely perform the best, because people’s awareness of evil leads directly to disgust. You don’t want to do business with evil, and if banks and governments are exposed as not just corrupt but radically evil, then people will likely flood out of their system into alternative assets such as precious metals and cryptocurrencies.

Related: 15 Weird Foods That Were Common During The Great Depression

Out of the Dollar and into Crypto

Some of the most powerful countries in the world have been buying physical assets while dumping the USD. Over at Zero Hedge it would seem that this is merely the first step of diversifying a nations economy. In this article entitled ‘Will Cryptocurrency Save the Financial System’ the prediction is laid out.

For example, Russia and China have accumulated many tons of gold and diversified their assets, dumping USD in exchange for tangible goods. A Crypto-Yuan or Ruble will eventually be valued more than an empty crypto-dollar without any counter-value. In the not too distant future, Yuan and Ruble will be backed with gold or other financial assets like bitcoin while new virtual currencies will continue to perpetuate their empty value as with fiat currency. No surprise that with the next financial crisis, fiat money will pour into gold and crypto market looking for a haven from the devaluing dollar. (Source)

If survival is about diversity of skills and adaptability, you better look at your economic survival the same way. There was a time when the pension was a safe bet, and then states started rolling that back, we put our confidence in the 401K and hoped that it would survive until retirement, now we are staring into a future where nothing seems solid underfoot.

It’s clear that cryptocurrency is not going away. The banks have been exposed and old guard influencers just don’t have the pull they once had on the American public. With nations, online communities and retailers taking advantage of the block chain, its time we realize this crypto economy will be dictated by the people.

For the first time in the history of money we can support and create our own haven for financial wealth.

Conclusion

It’s impossible to predict exactly what might happen in the next financial collapse. We don’t know what might trigger it and we don’t know where the public’s head will be. I think its safe to say that we will not have our confidence restored in banks and government before the next collapse. I think we can also agree that the moment the dollar starts to lose value people will run from it like the plague.

This means something must fill the void. Bartering will be part of any recovery and you should prepare for that. Still, assets like gold, silver, land and Bitcoin will have value outside of the U.S fiat.

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James Walton
By James Walton February 26, 2018 09:13
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23 Comments

  1. TheSiignsGuy February 26, 17:06

    I recommend looking into one of my favorite digital currencies called Guncoin.

    http://guncoin.info/getting-started/

    It exemplifies what many here may consider important in regard to beliefs, and also gives you the benefits of being a crypto-currency.

    From a possible investment standpoint, it is still a relatively low marketcap currency that could skyrocket once it’s use becomes more mainstream.
    (In short, it’s still cheap…get them while you can).

    Reply to this comment
  2. Chex February 26, 17:30

    It seems really odd to me that you would lump together gold, silver, land and Bitcoin, as though they were somehow similar as a store of value.

    Reply to this comment
    • Claude Davis February 26, 18:31

      It’s horses for courses. We can’t predict what kind of collapse we’ll face. A lot of scenarios will wipe out the networks Bitcoin depends on, but others won’t. If the government loses control but power stays on, cryptocurrencies could be safer, because they don’t rely on the government. In fact that on its own is enough to make them worth a look.

      Reply to this comment
    • andy February 26, 19:23

      Like this stupid “Petro” Venezuela is trying….yeah…just try to exchange it for a barrel of oil. Any currency you can’t walk into any bank and exchange for whatever “backs” it is simply a joke…..just like ALL the paper currencies that exist.

      Reply to this comment
  3. Bill February 26, 18:35

    I, too, wonder how you can lump gold, silver and land together with bitcoins. In my book Crisis Investing and Entrepreneuring, written during the last crash, I examined a dozen or so assets, such as the above, and they should be applicable in the future. I stayed clear of stocks even though I own some…book from Amazon or me in limited quantities, I’m close to running out.

    Reply to this comment
    • Claude Davis February 26, 23:17

      How useful any currency is depends on the situation. If I had one day’s food left I don’t care how much gold, silver or land you offer in exchange; you’re not getting it. If a local economy has stated to rebuild, they’re more use.

      Reply to this comment
  4. Mark G February 26, 19:04

    You can keep crypto safely offline on a paper wallet.

    Reply to this comment
  5. andy February 26, 19:35

    “only 21 million bitcoins possible”….sure….so what. How many other cryptocurrencies could there be, given there are 1200-1400 at last count ?

    Answer: An infinite number…and who is to say one is ‘worth’ more than another ? Speculators ? Tulip bulb salesmen ?

    And notice how almost any time you see an article about bitcoin, they will have a picture of some coin looking thing with a B and $ symbol on it. Why….not like any actual physical coin ever existed ?

    Answer: Because people have trouble visualizing electronic 0’s & 1’s off in cyberspace…so they attempt to provide a picture of something that doesn’t exist. Simply shows what a joke the whole thing is.

    Reply to this comment
  6. Rudolf February 26, 19:56

    “Ask a Prepper” is REALLY the best thing that EVER happened to me! Mr. J. Walton is VERY CLEVER (maybe even DEVIOUS, sly, tricky, foxy and artful) to cunningly conceal, that in a SHTF scenario only Gold, Silver, Ammo, Alcohol and Cigarettes will be bartering items. In any case not LAND in the US! This because the US Government paid billions of $ to Brazil, Argentina, South Afrika and Australia to accommodate 250 Million US citizens, when the great WHORE must be evacuated because of the gravitational forces of NIBIRU, which is now inbound, and which will cause the Yellowstone to destroy that great SATAN who killed so many innocent children, woman and men, without any mercy and bombed so many countries back into the stone age without any mercy! For all eternity must such DEVILS and SUPPORTERS OF NEPOTISM, PURE PARASITES be eradicated from this planet! At least is Mr. Walton honest enough to WARN us (simple) preppers, that that thing in the cloud will depend on ELECTRICITY and is hence vulnerable to an EMP or power outage. Therefore, this crypto economy will NOT AT ALL be dictated by us, THE PEOPLE but simply by the availability of ELECTRICITY and therefore THAT money will in any case NEVER EVER create our own haven for financial wealth. That the US$ will collapse is already decided and agreed. Please refer to: https://www.youtube.com/watch?v=5JT0Kq01CFg

    Reply to this comment
  7. lc65 February 26, 20:13

    “…Born out of some very brilliant economic principles…”
    Waiting to hear about them.
    So, if the dollar crashes and a Bitcoin is worth a million dollars, that won’t even be as useful as the German Weimar Mark ! You can’t even burn it to stay warm.

    Reply to this comment
  8. IvyMike February 27, 00:20

    The beauty of Bitcoin is that it is by nature subversive, a currency no government has found a way to control, a great facilitator of untaxable transactions. Solving the equations to create a Bitcoin takes a tremendous amount of computer power and a tremendous amount of cheap electricity. China has both and is one of the centers of Bitcoin mining, at the same time the Chinese government is trying to suppress crypto currency because anything they can’t control they take as a mortal threat. It appears North Korea keeps their military economy running with Bitcoin. Then there is the large amount of dope flying around the world courtesy of FedEx, UPS, and the US Postal System, most of it paid for in crypto currency. In a SHTF I’d hate to have my assets in crypto, that has to be the first to go followed by the Dollar if the U.S. economy suffers serious long term damage. For no good reason gold has kept it’s value throughout history, but people who want the economy to return to the gold standard puzzle me, the result would be the government once again banning citizens from owning bullion as it frantically tries to scrape together enough of it to back the economy. Think I’ll just keep growing taters and haricot beans and maybe hoard some cheap silver 100% agave Tequila…

    Reply to this comment
  9. Randyman February 27, 01:27

    Spread your wealth around, some gold some silver, some paper dollars, under matress not in bank. Some guns, limit to essentials, gun grabbers are coming hard so don’t keep your retirement in guns, you may end getting $50 per gun like they did in Australia. Some long term food stores, but only buy foods you eat and rotate trough your stocks.

    Reply to this comment
  10. Hoosier Homesteader February 27, 01:57

    One day, there will be one currency. Anyone can see this if you read the last book in the Bible. Will it be a cyber type? Probably. The world’s a mess and it doesn’t look like it’ll be getting better.
    I’ll keep doing what I’m doing; prepping, gardening, and doing whatever else I can to make the transition when a crisis strikes.
    Like Billy Graham once said, “I don’t know what the future holds, but I do know who holds the future.” I think Billy hit the nail dead smack on the head. I’m with him.
    I’ll concern myself with whatever happens, when it happens and not worry about the countless things that “Might” happen. Mostly because I’m enjoying life too much. I’ve been blessed, and I know it, and I’m not going to change what I’m doing for this, that, or the other. Life’s too short. Thank God for what you have and make the most of it.

    Reply to this comment
  11. wasntme February 27, 04:43

    Seems like a few $million in bitcoin get stolen every so often.

    Reply to this comment
  12. lc65 February 27, 19:54

    The article states that only “…21 million Bitcoins will be created ” ever. Yet they can be created by ” MNING “.so which is it ?
    IvyMike, what kind of job do you have to have to ” know ” that N. Korea is funding it’s whole army by mining / creating Bitcoin ?
    Next, if NK can fund it’s army, and it may be the poorest country in the wotld, what is keeping every other country from creating bitcoins out of nothing , I mean mining?
    Where is the author with some answers ?
    Are anonymous illicit drug transactions a selling point ?

    Reply to this comment
    • Claude Davis February 28, 22:57

      It’s complicated, but the mining system is set up so the number of new Bitcoins that’s created will fall over time, and when 21 million exist the whole mining system will shut down.

      Reply to this comment
  13. lc65 February 28, 23:22

    So, Bitcoin is kind of like a stock in that the value goes up when people buy it and bid the price up. Then, when the financial crisis hits, people will want to “cash in “ their Bitcoin so they can pay the mortgage,etc. and the value will drop, just when you need it.
    Also, there is not really anything there, except a “ blockchain record “, which presumably is just ones and zeros in the nether world 0110001010101110001010101111100000…. Etc. So, nothing of value unless people want it, just like greenbacks.
    In the meantime “ IvyMike “ tells us Bitcoin is financing North Korea and China. Seems reasonable, they probably invented it ( those inscrutable Orientals ! ). Also, it is great from transacting drug traffic, I presume human traffic as well.
    So, what is the upside again ?

    Reply to this comment
    • This kid March 1, 17:42

      So…you think the full faith of the U.S. government is any better? 95% of the economy is done on credit. Hmm, maybe 90% minimum. When one large creditor can’t pay the next the house of dominos, cards…your favorite here, goes down. While I have investments in crypto assets I am aware of the dangers. Aren’t there inherent dangers in any investment? I will continue to invest in Blockchain technology as I think it has great potential. It can secure your social security number, (the replacement for it anyway). Your SS number may have been hacked in the Equifax hack. Blockchain can’t be hacked which makes it attractive for all sorts of things we need for online and analog living! Be Blessed, believe for good prepare for the bad and carry on!

      Reply to this comment
  14. Jay March 6, 20:04

    Gold: Dig a bunch of holes, find 21 gold nuggets. Each Gold nugget is divisible 10,000 times. You put your hold in a hiding place/mattress,safe.

    Virtual currency: Solve a math problem so hard that it takes special computers months to solve it/hundreds of years of a genius to solve by hand. Get 21 million “nuggets” divisible by 10,000 as of now. Store on a durable hard drive. Put the hard drive in box, on top of gold.

    SHTF: charge your cell phone (containing blockchain) with solar. Take virtual currency from hard drive and put on phone using the phone charging cable. Leave heavy gold at home, take cell. Buy stuff/distribute and update the blockchain by holding phones near each other. Done. No grid required, no heavy lifting, no need for change, no need for gment.

    Reply to this comment
  15. Tammz April 2, 08:49

    Kazakhstan’s National Bank may ban cryptocurrencies. This follows a trend of countries opposing decentralized cryptocurrencies for fear of money laundering. Leading the charge was the Russians when Putin announced earlier this month that regulation would be coming in March and plans to launch its own currency. It will be interesting to see what Russia gonna do.

    Reply to this comment
  16. Enigma April 14, 14:32

    When people can’t see and touch a value-bearing instrument, they won’t trust it. Civilizations and commerce are dependent on trust.

    Only relatively-rare durable metals can be enduring stores of value. Gold, silver, platinum, copper, and some of their alloys – coined, and testable by neutral third parties.

    Folk should get and read Francis Fukuyama’s book *Trust*. And forget about passing fancies such as digital ‘currencies’.

    Blockchains may have some utility in logistics.

    Reply to this comment
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