Posted 10 months ago | by Ben Armstrong
Global Currency Collapse and Trade Wars Will Benefit Decentralized Assets
According to some – we may be entering the critical phase of the fourth turning. There isn't much good news if that is the case – and we can expect to see major issues with how the global order is maintained.
One of the biggest problems the world faces is how interconnected the trade and finance systems are – and also the fact that there are no hard assets left within the financial system. Crypto and metals are great assets – but few use them as money.
Add to that the growing divide between the US and China – and we can see how economic cooperation as we know it is over. While this is a deep and complex subject – the results are simple enough. There will be economic strife – and loads of EZ money from the central banks.
Global Trade is a Fragile System
With the Trump Administration successfully halting Tiktok’s operations and managing to sell it off to Oracle, we expect sooner or later, China will retaliate in a similar fashion and the effect on the US economy could be unprecedented.
One exception to the fallout of these political potshots is the crypto industry thanks to its decentralised nature. Crypto enjoys wide support globally – even in China where it is illegal.
Many public blockchain projects such as Bitcoin operate on a community basis. This means there is no one entity or organisation to be in charge of the project or to adhere to any sovereignty. Sharlyn Wu, CIO of Huobi, a major exchange in the crypto market, also shares the same sentiment.
“Crypto is about the decentralized network and you can’t really track down a particular group of people in a country,”
Unlike many businesses, which are obligated to follow rules and regulations of any country they are conducting business in, whether regulations are relaxed or strict, crypto appears to be largely immune from most regulations.
An Economic Superposition and Growing Fear
In the recent case of Tiktok and Wechat, US regulators stepped in to stop the flow of US consumer data to China – which was likely a massive threat to national security.
Without a governing body, most blockchain and/or token projects are insulated from these political influences. Even if a state wanted to go after Bitcoin – at most they could hit their citizens with fines for using crypto – but not derail the platform itself.
In the past, the US has been a leader in the crypto industry with many successful crypto projects such as Ethereum which draws the intention of blockchain enthusiasts and many of these investors are extremely eager Chinese citizens.
RockTree Capital CEO, Omer Ozden, commented,
“Chinese crypto investors are very enthusiastic and active, reflecting the FOMO phenomenon.”
But, in recent years, China has become one of the largest blockchain incubators after the national strategic revaluation in 2018.
We think that as the tension between the two nations grows, Chinese investors might shift their attention to homegrown projects as they are growing more and more comparable to projects in the USA.
However – making those projects internationally viable is another story.
The Blockchain Goes Private?
Unfortunately, for enterprise blockchains, they are inherently a business in form and must be subjected to the same rules and regulations as any, and will also face the effect of political tensions in many nations.
Jonathan Zerah, the head of marketing at Status, an Ethereum-based messaging enterprise commented on the vulnerability of centralised blockchain businesses.
“Centralized technology creates chokepoints and attack vectors for third parties to exploit...They become susceptible to financial exploitation and even blatant censorship.”
This may or may not be the case in a universal sense – but it does give decentralized platforms like Bitcoin a huge advantage over a platform like Facebook's Libra – which will be subject to regulatory hurdles in any market it wants to enter.
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