Bitcoin price chart 03.13.20
Opinion

Bitcoin democratized finance once, but it can’t grow like that again

Cryptocurrency prices will rebound once the panic subsides, but they will never do what Bitcoin did at the bottom of the Great Recession in 2009

Crypto paints a rosy picture of the bitcoin “winners” of the last recession. Don’t expect that this time.

Looking back on the 10th anniversary  of the “Great Recession” New York Magazine put it this way: “The older folks hoovered up gold, which basically doubled in value in the four years after the crash. Younger folks dove into cryptocurrency.” 

And that checks out entirely. Some back of the envelope math: if you put $100 into gold you’d have $200 after the crash. If you put $100 in bitcoin in February 2009, at the bottom of the recession, you’d be sitting on $433,333 by 2012. But that could have been $11,666,666 by 2013.

It would still be more today. 

But, with all due respect to Bitcoin $100,000ers like Anthony Pompliano, it can’t do that twice.

But what is amazing is how Bitcoin democratized finance. It turned it from a high-fee experience with account minimums too far out of reach for younger traders.

The last recession started on September 15, 2008, when overleveraged Lehman Brothers fell off a cliff and took the world’s economy down with it. But just before this chaos, an intrepid tech-believer named Satoshi Nakamoto registered the domain bitcoin.org on August 18, 2008.

Without the Great Recession, we still might have something called Bitcoin. However, what we did with it and how an entire $110 billion cryptocurrency (as of press time, via Messari’s Real Volume) grew from that would most likely have been entirely different. The point is that no one could have predicted it.

The earliest days of Bitcoin dictated our present moment. It’s worth it to revisit some of the stories that eventually framed the cryptocurrency world we’re in now. In the last recession, the average stockboy couldn’t buy stocks. Even E*Trade’s $4.95 fees turned every $100 trade into $95. A 5% tax just for not being rich.

Now you can trade for essentially free—just like on many crypto exchanges. That helped force everyone to take a look at the fees they were paying. Not just on crypto startups like Robinhood, and CashApp. But even at the formerly tony Charles Schwab. (“We believe price shouldn’t be a barrier to achieving your goals.”)

Younger folks fueled the crypto insurgence. They almost had to, since they were the first ones laid off in the Great Recession. They didn’t have 401ks to capitalize on during the upswing. But they did have bitcoins.

 This time the early Bitcoiners will have both at their disposal. It is highly unlikely that the next 10 years in crypto will see a surge like the one that followed the last recession. But the world of fintech is a better place for it.

Updated title for clarity on March 12, 2020 at 4:35 p.m.

Brendan Sullivan is a writer, producer, and author of the memoir Rivington Was Ours: Lady Gaga, the Lower East Side, and the Prime of Our Lives. Disclosure: he owns cryptocurrencies. Follow him on Twitter.

Subscribe to the
MODERN CONSENSUS Newsletter