How does crypto react to an economic crisis?

Thoughts on the recent price decline and how things may play out in the short-intermediate term

Welcome to this week’s edition of RHIZOME WIRE!

What is going on?

As fears of COVID-19 (coronavirus disease 2019) continue to manifest and amplify - the global economy as a whole - and stock markets in particular have started to tumble drastically within the past few weeks.

For crypto, the same has been seen in recent weeks.

Notable cryptocurrency critics have stated “bitcoin is no longer a non-correlated asset,” while others have been seemingly scratching their heads in a state of confusion.

Last evening, I published an article doing a deep dive into why I think the price decline we’ve witnessed within crypto makes more sense than what many have been suggesting in the crypto-sphere.

The confusion stems, for many, in the viewpoint that when it comes to Bitcoin - it’s seen as a “safe haven” or “hedge” from the traditional financial system. However, after some consideration, the price decline we’ve witnessed within crypto makes sense, for a few reasons.

First, in times of economic panic, there is rush toward cash. This isn’t necessarily because people and companies have found a newfound intrinsic love for the long-term value of the dollar; rather, they’re in need of liquidity. For individuals, this may be because they aren’t sure if they’ll have enough money on hand to pay for expenses over the coming months, or it may just be because they see their 401k balance falling and decide to panic sell, or a combination of both.

The lack of certitude in where tomorrow’s dollar is going to come from will only propagate one thing - selling assets. One cannot pay for things such as rent, food, bills, etc with assets such as gold or stocks - they need cash.

The same can mentality can be applied to crypto.

In other words, if you’re not sure that you’re going to have an income next month, your desire to hold Bitcoin (or any other cryptocurrency) falls dramatically. While the philosophical belief in HODLing may still be there, it’s going to take a back seat to the need to put food on the table.

How might this play out?

Since Bitcoin has often been compared to gold - in the sense that one day it will become supplant to gold in being a “safe haven”, looking into gold’s performance in a past economic crisis may shed some potential repeating behavior for Bitcoin in the coming months.

The above chart was taken during the time of a previous economic crisis - the financial crisis of 2008. From January to October 2008, the price of gold fell from just under $1000 to a bit more than $700.

Despite the significant financial turmoil witnessed within the markets at the time, the price of gold, a proclaimed “safe haven” - fell drastically.

While Bitcoin was not existent until after the peak of the financial crisis, the above investor behavior in gold at the time, propels some interesting observations.

Could what we are witnessing now be similar?

The answer to that question is a difficult one as the aforementioned economic crisis witnessed in 2008 - was due to a truly broken system that was destined to correct itself. Nonetheless, the decline in gold’s price and what we are witnessing now with Bitcoin and the traditional financial markets paint an ode of similarity.

However, with events on the horizon such as the bitcoin halving, the next few months for Bitcoin and crypto in general - will be interesting to witness as they unfold.

I encourage you to read the entire article!

News from ICON World

P-Rep governance meeting #2 has concluded

The second P-Rep governance meeting hosted by the ICON Foundation has concluded. Unfortunately, for this months meeting, there was not a YouTube video uploaded.

Topics discussed during the meeting can be found on the forum, viewable here.

ICON has been fully integrated into Dapp Review!

After going through the ICON community grant program, Dapp Review has been approved for a grant and has recently integrated ICON into their platform.

Blockchain-based used car trading system

Loopchain, the Seoul Metropolitan government’s standard blockchain platform for all current and future applications is being utilized in a reliable used car trading system - Seoul Automotive Industry Integrated Information System.

Blockchain-based voting system

The Seoul Metropolitan government introduced its blockchain-based voting system utilizing it’s standard blockchain platform - loopchain.

Business as usual for ICON.

MetrICX v2.0 has been released for Android and iOS users!

RHIZOME has recently released a new version of MetrICX. The new version includes several new highly requested features from the ICON community including, but not limited to, dark-mode, multi-addresses, TAP dividend tracking, and more!

Be sure to download the app for iOS or Android if you haven’t already!

ICON in mainstream media, again!

Subtitles courtesy of ICON DAO.

Blockchain Industry News

Wipe out! Why many BTC miners just got liquidated in China - Decrypt

The thinking among the miners was that it made sense to effectively pawn their coins for cash now, wait for the price to go up as the halving approached, and then pay the loans back. In the meantime,  the miners would get operating cash in fiat, which could be used to pay for electricity, daily expenses, and invest in the latest, more powerful rigs.

MakerDAO Governance Approves USDC Stablecoin as Collateral - Cointelegraph

While the Maker Protocol has mechanisms in place for such events, the scale of the sell-off led to these not functioning as intended, and in at least one case, liquidated collateral was auctioned off for 0 Dai.

Craig Wright ordered to pay $165,000 in legal fees - Decrypt

The legal fees Wright was ordered to pay today were incurred during the litigation of two motions regarding the production of documents on Wright's alleged Bitcoin holdings. The Kleiman estate's lawyers originally asked for a total of $658,581.78, mostly for wages, with some expenses included. The judge found that the lawyers were charging excessive rates and had billed for hours without specifying what they were working on—striking these expenses.

Tezos Co-Founder Turns to Gaming With ‘Hearthstone’ Competitor - CoinDesk

The whole project is being built on Tezos, so all trades will be made in the blockchain's native cryptocurrency, XTZ, but the company is also working to hide this behind fiat rails for users who don't care about the crypto aspect.

BitMEX Explains Why Bitcoin Nearly Hit $0 Last Week, Pays Out $200K - Cointelegraph

Coming at a time of intense volatility across Bitcoin markets, a botnet managed to consume hardware resources, ultimately causing BitMEX to fail altogether and go offline for around half an hour.