John Vaz, and economist at Monash University, has suggested that bitcoin’s future may well depend on how governments handle the Covid-19 crisis and the resulting economic fallout.
In his paper, he also stressed the importance of wider adoption and acceptance of cryptocurrencies, and compared bitcoin’s possible role as a money commodity in the context of deepening economic crisis to the use of cigarettes as a form of currency in prisons.
Vaz was unsurprised that the price of bitcoin has declined, pointing to the liquidity crisis in all markets: “When things go into chaos, people dump them,” he said.
He then emphasised that “everything has taken a downturn at the moment,” noting that only a handful of “commodity-type assets” like gold are being seen as ‘safe haven’ assets, and have so far not seen the same decrease in price.
He also took a shot at the US dollar, saying that in no way was it a ‘safe haven’, because it is “is probably the most poorly managed asset.” As reported by Cointelegraph, he said: “The bizarre thing is that the U.S. dollar is seen as a safe haven and it’s probably the most poorly managed asset […] given some of the expenditure that’s going on in the U.S. — huge unfunded tax cuts given to corporate sector and so on, large defense spending, and now even larger spending for economic stimulus. So how will that be dealt with?”
But he does see the crisis as an opportunity for bitcoin and other crypto assets, saying it could emerge as “an alternative currency with some stability and protection from the basement.”
Furthermore, he argues that the very same economic policies “that motivated the creation of Bitcoin and cryptocurrency in the first place” are “going to be running on steroids post-crisis.”
Vaz also states that cryptocurrencies are more equitable than fiat currencies, as “you don’t have banks or governments hijacking losses and privatizing the profits,” adding: “There is less opportunity for those sorts of things with cryptocurrency, so that makes them attractive potentially as an alternative form of money.”