Bitcoin Post-COVID-19: Bullish or Bearish? | Futurist Explains

The crypto plummeted like every other asset, and to me, that destroys the narrative.

So what value does bitcoin have, if not as a safe haven?

I do think that our interconnectedness, while it certainly spreads the virus quickly and accelerates it, it also accelerates the response.

Hi, everyone, my name is Giovanni. These days, the future looks more uncertain than ever for the crypto industry and the world as a whole. Today on our show, we have a guest who can give us some perspectives of things to come. And futurist and author Daniel Jeffries. In a recent tweet, you said that the COVID 19 pandemic is a threat to the existence of crypto. You also said it is an opportunity for it to forge itself into a living weapon. We need to overturn the debt bubble monster world we live in now. Can you explain what you mean by that?

So if society is under severe economic strain, which tends to lead to authoritarianism, it tends to lead to famine, it tends to lead to war, then you start to see Central Powers come to pass. If they begin to put in capital controls, for instance, and people try to use cryptocurrencies to evade those capital controls, governments will swiftly move to destroy all centralized exchanges and local Bitcoin operations. Then how much is your crypto worth? It's worth nothing, because you're not going to take $100,000 or €100,000 down in, in a bag to your local bitcoin drug dealer in order to exchange money. So there's a systemic weakness in crypto that I think gives people a false sense of confidence that they can't cut off the head of the snake because it's decentralized. And then people say, well, it would need to be a worldwide effort. No, it wouldn't. If you live in Spain and all the exchanges are cut off in Spain and 99.99% of your wealth is wrapped up in the financial system there, which is 99.9% of the entire world, then good luck getting your money out. If the United States cuts it off, if Russia cuts it off, good luck getting your money out of there. And so it does not need to be a global effort, and it is not developed into a parallel economic operating system where the money is distributed directly to applications and people, that bypasses the fiat system. So it is systemically incredibly weak. And if society is facing all kinds of threats, and so I don't believe that crypto itself, it's not a bullish scenario for crypto. If the worldwide economy is crashing and we enter a Severe recession or a Great Depression. It's something that's on the radar of governments, and they will come after it with impunity.

Okay, and you also said that this can be also an opportunity for crypto to. To become like a living weapon against this bubble monster world we live in. What do you mean exactly by bubble monster world?

Well, so, I mean, we have trillions and trillions and trillions of dollars of derivatives and debt that keeps accelerating. The United States just passed a $2 trillion stimulus bill, and it had already seen a dramatic acceleration in debt. We've seen debts that are skyrocketing across the world. Some economists believe that debts don't matter in the least. I think that that is probably true to some degree. In other words, that governments are able to issue much more debt than I think the average Austrian economist thinks. However, there does come a tipping point where governments can certainly collapse. So in a crisis, it forces people to think faster and to do things that they might have been putting off. Crypto will be no different in terms of responding to the crisis. Suddenly, they might. The cryptocurrency communities might get the idea that they need to actually build an entire ecosystem of goods and services, not just money. That reflects the philosophy and say, good luck finding a place to spend it. You need to build goods and services. You need to build an entire ecosystem where merchants want to come in and build services within that currency itself, digital goods, real goods and services. And I think you've all. Harari said that this is accelerating progress in some respects. So his university, for instance, had debated for 20 years whether to put some courses online, and then they got it done in a single week. So this is the type of thing that puts incredible pressure on every type of community. And the crypto community will be no different, especially if they come under pressure from governments. They will be forced to adapt, and they will be forced to develop complete new ecosystems that distribute money beyond the fiat system. And I think that's where a lot of innovation can come very quickly. But until they start to feel the pressure, I don't see that innovation happening just yet.

In another tweet, you also said that crypto, as you know, is dead. It will need to evolve to survive. What did you mean by that?

I mean, again, it's strategically vulnerable. Again, I always look at how to destroy a system in order to figure out ways to make it stronger. And when I look at something like a proof of work system, it does not take a genius for a country to go in there with guns and seize every major mine and take control of the situation. In other words, if you have a giant operation that sucks up a ton of energy, it's not that hard to detect on the grid. Okay? It is not, it is not anonymous. And all I need to do is send in armed soldiers with guns to steal your mining operation. Second, if I cut off the head of the snake with centralized exchanges, how are people going to get their money out of that system? So in my mind, the system is still very much in early alpha technology. We're starting to see advancements in scale, we're starting to see advancements in ways to do decentralized consensus, but we still haven't seen a complete ecosystem. Perhaps the closest thing, ironically, was Facebook's attempt at it. And you saw how quickly governments reacted to that. They were the first ones to try to build a multi coin solution. A solution that would have programmable digital assets, that would have multiple people with skin in the game, a governance system that allows them to vote and be punished if they do bad things. A greater scale, a systems of good and services that could potentially be sold there. A built in audience that they could distribute money to either through a gamification, directly to applications or just by distributing it. And they had a system for bringing capital in and out of the system in a unique way, plus capturing interest and wealth for the people who created it. So they had created a complete ecosystem. And I challenge every, every, every crypto community that's looking at it to think more comprehensively, to look at what Facebook did, and to learn that if you want to build something that's incredibly successful, you have to think about it at a macro scale. You have to think about buyers and sellers. You have to think about the average user. You have to think about a protocol that would allow people to automatically reset their password without it needing to be centralized. You would need to think about ease of use. You would need to think about alternative distribution mechanisms and scale. It's not enough to solve just one of these problems, you have to solve all of them in order to build a robust community. So I challenge every community out there to look at it in a bigger, bigger, bigger picture.

The narrative of Bitcoin being a safe haven and uncorrelated asset was disproved when the market crashed together with traditional markets earlier in March. Do you still believe that Bitcoin can become a hedge against the traditional financial system?

Again, it depends on which of the scenarios we're talking about. If we're talking about the more mild scenarios, then yes, it can start to become A bullish asset alongside gold and funds that are able to trade long and short in the marketplace, as well as biotechnology and other assets that potentially could weather the storm in a more mid range to darker scenario, I think the answer is clearly no. I think the asset crashed along with everything else. And I think the things that I pointed out earlier, which is the, the weakness of its ability to be resistant in a very dark scenario to people even getting their money in and out of it, makes it a speculative asset. And it's still a speculative technology. It's still an early technology. People shouldn't be surprised by this. People are clinging to the belief, despite the fact that reality has shown that it wasn't the case. And I tweeted earlier today that when you have a belief system and it comes up against reality, reality has an undefeated record. And when you come up against the market and you have a desire to make money from the market and you have a belief or an inclination about which direction the market's going to go, and one of those things is, and it proves to be incorrect. The market is not incorrect. You are incorrect. It's as simple as that. You either made money or you did not. It's a very binary game. And the fact is that crypto plummeted like every other asset. And to me that destroys the narrative. Some people hold onto that narrative anyway because they believe that without that narrative, crypto has no value. That's not true. Just because I now have adjusted my viewpoint that it's not proving to be a safe haven, doesn't mean that the technology is not valuable or won't continue to evolve or potentially be incredibly wonderful and disruptive for society. But you don't need that to be true.

So what value does Bitcoin have, if not as a safe haven or a hedge against the traditional financial system?

According to you, as a proof of concept technology, then for other crypto technologies, in other words, like the blockchain itself, and the idea of the proof of work, and the idea that you could build a decentralized consensus system without a centralized power behind it, and that you could make that system work over a significant period of time, are the abstract solutions that still make it incredibly valuable. In terms of Bitcoin itself in a dark scenario being particularly valuable, I don't see how that's the case if you can't get money easily into it and out of it, and mines are easily feasible. And so I think people need to abstract the general solution from the thing itself and not be sad about that. Bitcoin has already proven a remarkable technology, a remarkable solution to many different problems. And it's lasted a very long time. All with in respect to many things. It hasn't been broken into or hacked or destroyed it. And by all intents and purposes it probably should have because a number of forces have been trying to crack that thing since it, since Satoshi released it. And it's proven very resilient. So I think it's a remarkable technology regardless. But whether bitcoin in itself, and I've said this for years anyway, in my predictions about cryptocurrency, right. In the next 20 years, I said that Bitcoin had a 50, 50 shot. I love bitcoin. I still think it's one of the best assets, certainly in a mild to mid range scenario of the current apocalypse. But in a dark scenario, I think the fact that it dies is very strong and it has to evolve into something else.

When you talk about this dark scenario, you mean that the governments are the potential threat to Bitcoin, right?

No. Well, they certainly would be the threat to Bitcoin, but that would actually be the least of our problems in a dark scenario. A dark scenario is that we're living in a redo of the 1930s at an accelerated pace and that a systemic failure. In other words, all of the governments have issued these massive stimulus bills, they've cut rates to zero. They've essentially fired all of their weapons at once. And if this thing goes on for months or six months or a year or two years, then we're going to see huge amounts of business collapses, we're going to see cascading mortgage failures, we're going to see a lot of people unemployed, very angry. And that gives rise to authoritarianism, it gives rise to famine, it gives rise to war. So Bitcoin and the virus will be the least of our problems. They will be a distant memory. And the government's, I mean the government's threat to Bitcoin will be the least of our problems in that kind of scenario, when we're all kind of worried about millions of people suffering in a kind of global catastrophe. So there is very, again, I don't like these kind of dark speculations. I think people seem to be feeding on this fear. They seem to look at these exponential curves and say, look, I've calculated an exponential curve. This thing goes up indefinitely. And that's just not true. When an exponential curve goes up against chaos, which is gazillions of variables that are impossible to calculate, even if you stack together all the world's supercomputers, you would quickly run out of power in minutes. It means that nothing worked. No vaccines, no interventions, no quarantine, nobody working on repurposing drugs, artificial intelligence tracking, social distancing, intelligence spreading. None of those things interrupted that curve. None of those things had a variable effect. Again, I'm still very hopeful that we are not speeding down this path. But I think it has to be acknowledged that this is a very real potential path. Perhaps for the first time since the 1930s and definitely for the first time within my lifetime. It is something that is creating legitimate fear and should be taken seriously.

But let's move to a more mild scenario where, for example, we saw the Fed and several other central banks in the world trying to adopt emergency measures to support their economies. And these measures are mostly about flow of cash, like injections of cash into the economy, cut of interest rates, and many people in the industry are speculating on the fact that these measures could eventually lead Bitcoin to prevail. In terms of an asset which have a determined amount, and that can be deflationary compared to fiat, what do you think are the chances that this scenario is going to manifest?

Well, I think we're seeing a true life economic experiment happening right before our very eyes. And I guess that we are going to find out. I tend to take a more balanced view of economics. I do not fall on the side of all inflationary currencies are bad and all deflationary currencies are good. I think every asset that exists in the world exists for a specific purpose. Speculative assets exist for a purpose. Equities, bonds exist for a purpose. Derivatives, long and short trading, cryptocurrency assets, deflationary, inflationary assets. Both of them serve different reasons. Deflationary assets certainly reward savers, whereas inflationary assets keep the economy moving quicker and encourage spending. Both, I think, are quite valuable when they're kept in balance. And I don't think that this concept that we only need one type of asset is realistic anymore. I think the world is just too complex. I think we need all kinds of assets and let thousands of different assets compete in real time. And we now have the chance to look at data for real. It's not just analog statistics calculated in a physical ledger. These are real time statistics that we're going to see play out in reality. I think what people are referring to is their own hope that their particular darling asset will be the dominant one. And that's nice and good, but again, that's a story that's going to come against the harsh light of reality very quickly. What I see generally when I look at economics is that when any of these assets get way too far out of proportion. In other words, when we inject too much inflation into a system, we inject too much cash into a system, there is a chance that it runs away. Just as you can also see a deflationary spiral when we saw in the 1970s, for instance, in the United States, where nobody was spending any money. And why would you, you might as well keep saving it because money is going up in value and assets are. So I think that in either scenario, each type of money can create unintended side effects. And there is a possibility that with injecting so much money that it could create a problem. I don't think it will in the short term, though. I actually think that governments have a lot more leeway in terms of debt issuance than most people in the cryptocurrency community would like to believe. Short term price control, short term liquidity boosts do tend to work. We've been working on a debt system for 50 years, whether we like it or not. And people have been calling the sky to fall for all of that time. I guess one of these days they're going to be right. And then I guess a blind squirrel finds a nut every once in a while. And a stopped clock has the right time twice a day. But I don't know that anybody gets any credit for that. If you call the end of the world every year and then you finally get the end of the world, I don't know that that makes you a strong predictor. So I do think that we can withstand this early issuance. But if governments keep half to issuing money and stimulus, then I think we're in serious, serious trouble. And I think that the crypto community will be correct. People will potentially look to deflationary assets as a hedge against that. It's a pendulum that swings back and forth, and if one is swung too far in the other direction, It'll be necessary.

COVID 19 exposed the fragility of the world we live in. Our governments are struggling to cope with this crisis. People are dying, and the global economy is heading towards recession. Still, in a recent article titled A Reason for Hope, you described how humanity has never been so well prepared as now to face a global pandemic like COVID 19. Can you point out what are the most valuable tools at our disposal which make us prepared for this?

So mass communication technology definitely allows us to disseminate information fast and it allows us to understand the types of procedures and steps that people need to take to protect themselves. If you're living in the dark ages, the virus crosses borders whether you close them or not. Even we don't have planes and cars back in the dark ages, but the virus still crossed the borders and you had no way to get out reliable information to people. So people basically just speculate in the dark. Now we're able to disseminate information very quickly, and people are able to rapidly consume that information and understand what they need to do. We are also seeing open science, and that is the science where researchers publish their results as quickly as possible and share them as broadly as possible. We saw the genome, for instance, sequenced of SARS CoV2, aka the virus that causes COVID19 be disseminated very quickly out of China. We're also seeing artificial intelligence crank through different types of drugs that are already approved. So this is one path for pharmaceutical and biotechnology where you can look at drugs that are already pursued for other things to find out whether they have efficacy against a new type of pathogen. Sometimes that takes years with current methodologies. Whereas artificial intelligence is already starting to speed up possible candidates much faster. And we're already seeing certain drugs be identified potentially, and doctors, since they're already essentially facing an invisible war on the front lines, are deploying those in real time. We're seeing the doctors on the front lines consume the same level of information about which drugs have the potential, and they're going to test them in the absence of any other solutions, rather than just allow their patients to die. So we're going to see. We're not going to have to wait for many trials, certainly for a vaccine we will, and I expect to see an exponential speed up there. But for existing drugs, we're not going to have to wait. The doctors already testing them on the front lines. And so that's an exciting procedure as well. We're also seeing the ability to rapidly deploy engineers and to build facilities. We're starting to see makers come to Marc to talk about how to build masks. I read an article on 3M having surge capabilities that they had already prepared for after the bird flu. And they're able to ramp up production very quickly. And they saw it within the supply chains. They already started to see the crunches within the supply chain well before everyone else started to be alerted to it. And they started to ramp up production of the Cadillac of N95 masks, the respirator masks that everybody needs to get their hands on. So I think that there's a number of things that we've looked at people's hyper interconnectedness and the interconnectedness of the global supply chain and said it's super fragile. It certainly is fragile, but it also has some incredible advantages. And I also don't believe that we can just go back to building everything in our own backyards. That's a nice fantasy, but it's just not true. But most parts of the supply chain, if you want to build a battery factory, a lithium ion battery factory, you can hire all the workers and build the factory and buy all the equipment. But if you don't have lithium in your own backyard, which you don't because it's primarily comes from Chile, Argentina and Bolivia, then you are not making batteries if you want to build a smartphone. Apple gets ingredients from 43 different countries. So you don't magically have those growing in your own forests or your own mines. Most of the drugs that are made in the world come from 80% of the active pharmaceutical ingredients come from China and India.

You don't think that the interconnectedness of our world in this case is a problem? You actually think it's an advantage?

I think it's an advantage. Look, people tend to think that if we slowed down and went ultra nationalist and closed off everything, and that people have the delusion that suddenly we'd stop the spread of the virus and have shiny happy people making everything at home. But again, remember the Black Death? The Black death wiped out a huge chunk of humanity and set it into a near collapse for I think a hundred years, if I'm correct. And there were no fast ships, there was no hyper interconnectedness. There were, you know, it wasn't easy to cross borders. It was incredibly painstaking to do so. And yet the virus, the pathogen, essentially swept across the planet. And that's happened on multiple occasions. So it's a false sense of hope that we can actually just go back to non interconnectedness as a solution. And I do think that our interconnectedness, while it certainly spreads the virus quickly, quickly and accelerates it, it also accelerates the response and our ability to coordinate information at a global scale in a way that has never happened in the past. It couldn't have even happened, I think, 20 years ago without the communications technology that we have now.

What do you think is the utility of blockchain in a crisis like this? Do you think that blockchain can actually help the world somehow to face the threat of COVID 19?

Sure. So one of the ways that I've been Looking at in an article that I'm writing now about potential radical or interesting solutions is medical reform. So one of the reasons that medical reform is so expensive and medical procedures so expensive is because doctors are forced and nurses are forced to hide information. They're not able to learn from mistakes. And the book Black Box Thinking talks a lot about this. So they talk about the airline industry and contrast it to the medical industry. And after a series of crashes in the 60s, the airline industry implemented a series of incentives that encouraged pilots and everyone else to file anonymous reports and be transparent. And if they're transparent, then nothing can be used against them in a court of law. If they file a mistake and report within 10 days, or when there's a crash, the black box team comes in and they look at everything and nothing can be used in a court of law. If people are forthcoming, if they lie, all bets are off. Then they look to build safety procedures that everyone has to adopt. As a result, the airline industry has one of the greatest safety records in the history of mankind. By contrast, doctors can be sued for the slightest mistake. They're encouraged basically by that negative incentive to, to be vague in their reports, to not share information, to create a hierarchy of secrecy, to say that things were a one off when people died. And so they're not able to spot mistakes quickly and learn from those mistakes because of the negative financial incentive. And so I think that if we had a blockchain technology, if we had a large disseminated technology and laws to back it, that essentially gave them immunity for telling the truth within a short period of time after every mistake, allowed them to use something like a ZK snarks technology to file reports anonymously and aggregate those reports to anonymize that data. It allows us to react in real time. I think that the blockchain technology, particularly a lot of the anonymization technologies that are available, can allow us to disseminate the information and allow people to report on these things. And if we pass the correct laws, we can dramatically reform the medical industry to support openness and learning from mistakes, which I think accelerates open science and, and accelerates our ability to deal with pandemics and other problems in real time.

The world is changing because of COVID 19. Whether we want it or not, what will the new world look like and what role bitcoin and cryptocurrency will have in it?

According to you, Covid leads to a large scale recession or depression. Then we'd start to see things like capital controls go into place we would start to see people not be able to take their money out of the bank. We've already seen the United States move to introduce a digital dollar, then strip it out of the bill. We know China is already basically beta testing the digital dollars that they've made and they've already moved towards killing off exchanges. We've seen Australia restrict $10,000 above transactions. We saw India try to phase out cash almost overnight and have to backtrack. So governments are going to want to have firmer control if there is a serious crisis. If they put capital controls into place or they feel like inflation is running rampant, they're going to want to have centralized control over those things. And they will introduce digital versions of technology because that will give them stronger digital control of everybody's lives. It'll put a Panopticoin in everyone's pocket as a result of the crisis and it will accelerate the speed at which governments do this. And so in my mind, that's going to be the fastest route to eliminating cash. And in the event that you eliminate cash, it certainly creates a lot of different pressures on society. Specifically societies that are primarily cash based at this point will suffer tremendously. And also just simply the ability to disagree with the government is part of a healthy, functioning society. We don't need, we don't need someone to consistently track every single transaction that you made so that they can build a psychological profile of you or just geographically turn off the money to starve out something that they don't like in a political response. All these types of things are going to be a cyberpunk nightmare that will soon be everyone's reality. I am still hopeful that decentralized cryptocurrencies, specifically anonymized decentralized cryptocurrencies, provide a bulk work against those types of disastrous scenarios which are coming quicker than people imagine. In this scenario, they will be accelerated in this scenario, potentially.

Thank you, Dan. That was very cool and interesting.

Thanks for having me on. Always fun.

And you guys, don't forget to subscribe to our channel for more exclusive content. Cointelegraph like subscribe and Hodl. Sam.