Just read an excellent post from BitcoinMarkets a few weeks ago which is worth sharing imho:
When BTCUSD's price action is boring as sin, it's a great time to think about macro trends and our long-term strategies. I think oftentimes we get lost in the action of the moment, and neglect to step back and take a wider view of markets. Hopefully this post is interesting in light of that.
I know I'm sporting a bear flair right now, but at my core, I'm a Bitcoin bull. I think most people here are, and I think our reasoning for being so is incredibly sound.
Ever since the 2008 financial crisis, world markets have been running through no man's land - a time of unprecedented central bank intervention. The reasoning was simple - the credit freeze spooked the fuck out of every business the world over, and made them paranoid and extremely risk-averse. To combat this, the Fed injected tons of money into the market ecosystem via TARP and the various QEs, intending to make the market environment seem safer and convince businesses to take on greater risks (risk-taking, of course, being the engine of economic growth). On the surface, this worked brilliantly. We've experienced a precedent-shattering bull market, unemployment rates reached historic lows, etc. But if you dig a little deeper, I think this intervention actually completely and utterly failed. Let's analyze what has ACTUALLY happened in major markets over the last ten years. Businesses, still shell-shocked from 2008, seem to have taken safe and easy routes to make money post-2008 - via things like stock buybacks, M&A consolidation activity, etc. Companies were able to buy the outward signs of growth in the easy-money, zero interest rate economy, boosting their share prices easily while not taking on much risk at all. In this way, Fed policy failed - it did generate nominal returns as stock prices went up, but risk-taking behavior actually seems to have gone DOWN. Capital seeking greater returns than the passive growth of the whole economy was forced to look for bigger returns by chasing tech startups, real estate, and riskier niche assets like crypto. There was more money chasing big returns than there were things actually worth those big returns, which left us with wonders like Juicero, the venture-backed wi-fi juicer company, the California housing crisis, and utterly useless, exit-scamming shitcoins like Oyster Pearl, respectively. Right now that very same risk-seeking capital is LOVING weed stocks, which are in the process of topping out right now, so check out r/weedstocks for some cheap laughs. TL;DR: The Fed's low interest rate policies did not create sustainable risk taking or long term growth. They just fueled market consolidation via balance sheets getting bigger, and sent capital on the fringes into weird corners of world markets, where it inflated all kinds of fun bubbles (crypto included).
Now, the Fed is raising rates, the ECB is playing chicken with Italy, and the US & China are engaged in a pissing contest over balance of trade. Each of these three are all spooky things that could cause a recession. As we watch US equities markets correct, any one of these dams could burst and become the catalyst that brings markets down. Rate raises could easily kill off some of the US's "flagship" companies - Sears recently filed for bankruptcy and GE is looking dangerously close too. In Europe, the populist Matteo government is threatening a repeat of the 2012 Greece crisis - but Italy is in a LOT stronger position than Greece ever was, making the outcome possibly dangerous enough to the Eurozone to spark an international crisis. Add the specter of Brexit and the really shaky foundations of Deutsche Bank to the mix, and you have a tinderbox waiting for a match. And don't even get me started on the US v China trade war - imagine the absolute chaos that would happen if the PRC manipulated the yuan in an "unfriendly" direction. The Chinese government is a real whale with real power, and they could dump their US Treasuries too to add insult to injury and ruin one of the biggest safe haven assets the world financial system depends on. TL;DR: There are three really big, somewhat probable "catalyst" events that could send world markets into a nosedive.
The really insidious thing about all of this is that the central bank emperor no longer has any clothes. If unprecedented intervention doesn't prevent the next crisis (or worse, creates an even NASTIER crisis than 2008), it's quite possible that the faith in central banking as a cure-all for crises will be shaken or totally undermined. I'm of the opinion that all that injected capital didn't make our markets stronger - it just subsidized risk-averse behavior and didn't adequately penalize companies for their lack of risk taking. It created paper growth (inflation) and not real growth. Laughably, it also subsidized the creation of never-profitable behemoth companies like Uber, so it'll be interesting to see how those companies end up in a time of crisis. TL;DR: The Fed inflated the USD roughly 17% over the period 2008-2018, for minimal (if any) gains in market strength.
And that's where Bitcoin comes in.
When the markets finally do get rekt after their 10+ year artificial inflationary orgy, it's possible that people will wake up to the fact that we live in inflationland. The illusion of stability and safety will be shattered once again, as will the illusion that central banks can do anything to control or "tame" the inherent wildness of markets. Consequently, it's possible that people will lose faith in the greenback as the de facto global arbiter of value in this scenario. It's not going to be easy to watch paper ETF gains melt away while companies nominally beat earnings, or watch long term bond holdings start trading way below par. The defeat of the "central banks are all-powerful" narrative will send shockwaves through global markets, which will realize that no one is in control. Bitcoiners have been adjusting to the realities of a system where no one is in control for some time now, so they'll have a head start. TL;DR: When markets get rekt, everyone will realize that central banks are just whales, after all. They make waves, but they don't make the ocean.
Bitcoin (and probably a handful of other non-inflationary cryptos) will benefit the most from this scenario if it happens. An inflationary world where no major currency can be trusted to hold its value long-term will send money scrambling for things with fixed or limited supplies. Precious metals and other commodities will probably also benefit in this environment, as people re-configure their investments to be as close to tangible assets and cash flows as possible. The tail risk of being financially ruined in an inflationary world is worth hedging against, and remains my dominant reason for holding 10% of my net worth in crypto at this time. I assume many of you folks believe the same.
Whether you're here to hedge against the inflationpocalypse or just to get rich, I wish you all the best of luck in acquiring as many BTC as possible. It's a long road ahead.
Onward.
np.reddit.com/r/BitcoinMarkets/comments/9u0pmo/daily_discussion_sunday_november_04_2018/e90mdum/
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