- Bitcoin was born as a safe haven but collapsed in line with legacy markets this week.
- Analysts say that was to be expected—safe havens arise after a crisis, not during one.
- Crypto actually fared pretty well and could become a beacon in a storm as things settle down a bit.
Bitcoin was born 12 years ago at the height of the last global financial panic, and was positioned as a safe haven from the machinations of centralized banks. Indeed, its inventor, Satoshi Nakamoto, posted in its genesis block a newspaper headline about the British government being poised to bailout the banks a second time.
So now would seem to be a pretty good test of Nakamoto’s marvelous monetary machine. How’s it doing?
If the events of the past few days are any indicator, not well at all. Cryptocurrencies including Bitcoin and Ethereum, have plummeted in line with the world’s stock markets. The industry saw a $26 billion loss in 24 hours, with nearly all cryptocurrencies experiencing double-digit losses. The meltdown in the crypto markets is every bit as bad as anything in the legacy finance world. (Well, perhaps not as bad as oil, which plummeted 27% today, after the collapse of Saudi Arabia’s oil-cutting alliance with Russia.
Was Satoshi’s whole blockchain-based vision just a mirage?
Not necessarily, say a number of economists and industry observers who spoke with Decrypt today. On the surface, the major blockchains appear to be roiled every bit as much as legacy financial markets. Yet, there may be reason for optimism. The meltdown could have been far worse, and funds will certainly start moving back into the more legitimate blockchains, as financial markets begin to stabilize, some say.
Markets go haywire
Most analysts believe that a “safe haven” is something investors can retreat to after the storm—not necessarily during it. When a fast-moving disaster settles in, investors try to immediately cover their short positions. That causes a nearly…