By the end of 2020, the world is about to see a glimpse of the upcoming recession. Several economists are now predicting that an economic turmoil is approaching as the aftermath of the Corona outbreak. As of now, all the core industries are in a standstill position, with a majority of workers and employees losing their jobs. The economic crisis has also set its branches to the crypto market. Although all the cryptocurrencies have fallen at large, they have somehow managed to recover so far. In this article, we will discuss 'would recession have occurred if cryptocurrencies were legal.
The new decentralized group of digital assets took birth when the Great Recession was about to end. Cryptocurrencies have not faced the sheer force of the recession at its fullest so far. Moreover, there exist more than 1600 cryptos, and each of them holds its ground in a different way.
Cryptocurrencies also breathed at the time when the GDP of the USA started recovering, coming from -1.73 per cent to 3. 138 per cent by 2017. Despite their adoption and legality, these digital assets saw a drop in their mainstream attraction when other traditional markets showed signs of recovery. People missed grasping the inherent characteristics of crypto assets at that time. They assumed that all of them would work in the same way, thereby neglecting the unique peculiarity possessed by each cryptocurrency.
In order to understand this, let us take an example of the three most popular cryptocurrencies that could best face the recession, Bitcoin, Ripple and Ethereum. All three of them have dominated most of the market via their capitalization. First of all, we will talk about how Bitcoin could have handled the recession this year.
Bitcoin is a cryptocurrency which had been used by some countries while overcoming the time of recession. Lebanon became the one which used Bitcoin amidst the economic crisis. During the time of economic downturn, Bitcoin has the ability to work as a market function much comparable to the safe havens that exist today. Due to the decentralized nature of Bitcoin, its supply is not controlled by an individual or an organization. Also, other assets that are backed by Bitcoin might have performed the same way. As a result, Bitcoin is a currency which is virtually immune to almost all the markets pressures during hard times. This year also, amidst the outbreak, Bitcoin has shown signs of recovery, and as of now, it can actually reach up to $7000.
Ethereum is the second-largest cryptocurrency so far. Because of its smart contracts and DApps, Ethereum shows much more inclination towards the market trends. Since its platform enables firms and individuals to create applications over its protocol, Ethereum is a decentralized technology which is more focused on mainstream developers and investors. If these particular individuals somehow suffered from any economic loss, Ethereum would also fail as a result. Ethereum platform is affected by the way companies develop their projects, and if their projects failed, Ethereum would also fail as a result. Thus, while facing a tough time of recession, Ethereuem works like equity rather than a safe-haven.
XRP is a digital currency which has its focus on the field of cross-border payments. The frictionless ability to transfer financial assets makes XRP emerge as an exchange medium rather than any cryptocurrency. Because this cryptocurrency operates beyond the control of the mainstream market, we can see easily that it might have beaten the recession just like Bitcoin.
In this article, we have seen that if cryptocurrencies were legal, they would have faced the situation in their own way. So far, it can be said that digital assets have the potential to encounter a tough financial crisis. For example, Bitcoin had been used by Lebanon when its fiat fell out of value. Also, we have seen that assets which show dependency in the market could easily fail to withstand the recession. Each crypto responds in a different way, and this depends on how the market utilizes it. Finally, I would like to say that cryptocurrencies should get a chance as they could be our best weapon during the crisis.
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