Crypto will cause the next financial crisis
Crypto will cause the next financial crisis
- cryptocurrency will cause the next financial crisis according to a CEO of a precious metal company.
- its concerns are the systemic risks from mass investment in an asset class that has no inner value.
cryptocurrencies have been exposed to a number of criticisms since their introduction to the mainstream. One of them is the threat to the financial system. The latest memory of the destabilization of the financial system by Bitcoin comes from Brett Heath, CEO of Metalla Royalty and Streaming. According to him, crypto will cause the next financial crisis.
In a recently carried out interview, Heath questioned the amount of liquidity that has flowed into the cryptom market since the beginning of 2020. cryptocurrencies are licenses for the private sector for printing money.
Heath compared the cryptomarkt with the previous induced crash like the tulip mania (1637), the credit crisis (1772), the Aktiencrash (1929), the Opec-oil crisis (1973), the Asia crisis (1997-1998) and the global Financial crisis (2007 - 2008). According to him, they all have something in common.
If you look back on the past few decades and look at all the financial crises that have happened, you know that you all have a few things in common. And one of them is the mass adoption of a new financial product or a new technology that is not yet very well understood.
In addition, Heath explained that the mass introduction of mortgage-proof securities and secured debt bonds in 2008 became a problem after people had accepted them as a new financial product.
The US M1 and the entire cryptoliquidity speak a lot
According to the CEO for precious metals, the M1-the entire liquidity in circulation-has increased by four and a half times the beginning of the year. Between January 2020 and April 2021, the M1 rose from $ 4 trillion to almost $ 18 trillion. This is even recognized as an incredible run in such a short time. However, the overall market capitalization of cryptocurrencies has increased by more than ten times, which is not normal.
his concern applies to the systemic risk of mass investment in an investment class that has no inner value. If a sale is triggered by a significant factor as in the previous asset crisis, this will have a significant impact on the financial system.
The crypto market could increase at $ 3 trillion, $ 4 trillion ... you just don't know how high it is. However, if you have wiped this amount of capital out of digital wallets all over the world, you should better believe that this will have significant financial effects.
Another concern are new cryptos with similar attributes, but not uniqueness. According to him, such assets will be the main victims if the sector collapses. However, some cryptos would resist and dominate like Google during the technical collapse.
Garrick Hileman, an economic historian at the University of Cambridge, also predicted in 2017 that cryptocurrency could be a systemic risk of the financial system if it becomes systemically relevant.
Source: Crypto-news-flash.com
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