The ongoing financial crisis across different markets has been a key talking point in various forums and discussions with more problems appearing every day than the solutions. Bitcoin, the world’s largest cryptocurrency is now being seen by many to be the saviour of the crumbling capital ecosystem.
Bitcoin’s recent surge has turned heads and many are looking at the cryptocurrency as a viable option to sort out financial needs. Now that central banks are revealing their lack of ammunition in the fiat space, more and more people are getting interested in the decentralized space. Jut recently, Mark Carney, the governor of Bank of England stated that major banks did not have enough capital with them to fight the speculated oncoming recession.
According to the BoE official, the global economy is heading towards a “liquidity trap” that would undermine central banks’ efforts to avoid a future recession. A liquidity trap occurs when monetary policy loses its control on economic swings and new policies do not propagate spending. The usage of Bitcoin aims to solve this problem by providing a limited decentralized supply that users can use to transact.
Carney further added:
“It’s generally true that there’s much less ammunition for all the major central banks than they previously had and I’m of the opinion that this situation will persist for s4ome time. It is not desirable at all to align our approaches, to tie our hands and to outsource regulation and effective supervision of the world’s leading complex financial system to another jurisdiction”
He was frank in admitting that if Britain were to fall into a steeped recession, what with Brexit and such events, BoE would run out of monetary policy space. The governor claimed that monetary policy was not yet a spent force internationally as the United States and the Eurozone had cut interest rates in 2019.
This has been one of the main reasons why many regions were now using Bitcoin and other cryptocurrencies. Venezuela has been one of the main proponents of this phenomenon with several other African countries following suit. During the political and economic crisis in Venezuela, Bitcoin trading volumes saw rapid increases. This was evidence that Bitcoin could solve the financial issues faced by people when their governments fail them.
The global recession has been an event that Bitcoin evangelists have prepared for. Some have even said that the mainstream financial economy will never fade away completely but it will be enabled to function better using blockchain technology and cryptocurrencies. Ripple’s Brad Garlinhouse was the main example of this. He has stated multiple times that the company wants to use the best of both worlds to better the overall financial ecosystem.