The Bitcoin markets desire to attract new money in, money on the level of venture capital, corporate investments and private investment from big-spending individuals has backfired heavily on the nascent financial system. Bitcoin was created to be a hedge against the traditional markets and banks, but it eventually became what it was to work against.

Because traditional markets are prone to financial turmoil, and often collapse all at once spectacularly, Bitcoin was created to be a hedge against that. Yet, as the coin hit the mainstream media space, it quickly changed its designation from a currency to a store of value, and welcomed institutional investment in.

This no doubt helped mature the market, and lead it to be taken more seriously with derivative trading and interest from CME, but it also aligned the anti-correlated coin to these traditional markets, opening it up to damage done in terms of recession, or ‘black swans.’

Not too many saw this as a problem as the prediction was that Bitcoin would actually thrive in times of financial uncertainty as it acts as a digital gold. But, in truth, the institutional investors who are big enough to have a say on the market, still treat Bitcoin as an investment for times of fear.

Well known Bitcoin commentator, Andreas Antonopoulos, did see this coming however as he predicted two months ago that a crash was possible.

“Crypto will crash hard”

Speaking on the What Bitcoin Did podcast on Jan. 3, Antonopoulos had identified the effect a recession or similar would have on Bitcoin’s price.

“What most people don’t realize I think is that, in the beginning at least, crypto will crash hard,” he said.

“And the reason it will crash hard is because a lot of the venture capital, corporate investments and private investment from individuals that is based on cheap money and disposable income and excess cash in portfolios etc., like in any other part of the economy, will dry up.”

“When people get scared, when there is a recession like that, they pull back their investments, and they’re going to pull back from crypto too.”

Getting too big

Ironically, Bitcoin having chased after big money and institutional money had blown itself up too big. He noted that Bitcoin alone in January required around $18 million of buys per day just to keep price parity.

“From that perspective, I think the first order effect that happens if we have a recession is crypto crashes because all the liquidity dries up which is a classic effect and symptom of a recession.”

In terms of being a safe haven asset, the coin is still not a good practical store of value for non-technical investors and the hurdles in cold storage — as an example — precludes them

Antonopoulos concluded:

“All of those things are really a symptom of the fact that we have a small lifeboat and a very, very large number of people who need saving.”