Many predict that cryptocurrency’s rise will be at the height of an economic crisis. Nouriel Roubini is a prominent economist and professor at Stern School. He predicts that the US will experience a financial crisis by 2020. It will be worse than the 2008 recession.
Roubini outlined, on Project Syndicate the 10 main factors that will cause the next financial crisis. The major contributor to the next financial crisis will be the Federal Reserve’s (FED) rising inflation rate. Roubini wrote:
Second, the stimulus was not timed well, and the US economy is overheating. Inflation is also rising above target. Therefore, the US Federal Reserve will continue to increase the federal funds rate from the current 2% to at minimum 3.5% by 2020. This will likely push up both short- and long term interest rates and the US dollar.
The central bank is responsible for managing fiat money and reserve currencies. Fiat money is a measure of the economic status of a country and tends to be stable. However, an increase in inflation and an overheating economy could cause the currency to be devalued.
Major currencies such as the US dollar, the pound sterling and Chinese yuan are strong at present. If a financial crisis, as predicted by Roubini, and most recently Kim Dotcom, knocks on our doors in the next two-years, every traditional asset or commodity, including stocks, bonds and currencies, will see a sharp decline in value.
After a steep 80 percent drop in value, the 2018 cryptocurrency market correction was fourth worst in history. Several cryptocurrencies managed to surpass a few national currencies, including the Argentinian peso and Venezuelan bolivar.
Roubini stresses that the US’s financial obligations will increase by the next recession, leading to worsening circumstances than in 2008. Roubini explained further:
“Finally, once this perfect storm is created, policy tools to address it will be severely lacking. Massive public debt already limits the space available for fiscal stimulus. Bloated balance sheets and a lack of room to reduce policy rates will limit the possibility of more unconventional monetary policy options.
Could Bitcoin be a Saviour for the World?
There are many critics of Bitcoin, including Roubini, who believes that cryptocurrency has no economic value and that they have not evolved into major currencies.
Anthony Pompliano, the founder and partner of Morgan Creek Digital (a.k.a. Anthony Pompliano (a.k.a. “Pomp”) is the founder and partner of Morgan Creek Digital. He stated that the institution would be encouraged to invest in cryptocurrency markets as an alternative to traditional assets over the next few years. Pomp’s statement is reflected in the rise of cryptocurrency adoption by regulated financial institutions such as Goldman Sachs and Morgan Stanley.
Despite facing bear markets, Cryptocurrencies have been attracting more attention from notable companies Coinbase and BitGo as well as Goldman Sachs. Most likely, the next financial crisis will fuel the dominance of crypto over traditional finance markets.
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