Is Bitcoin Really Safe? New Insights from ‘Black Swan’ Author on Recent Crash
Bitcoin has led a global crypto market downturn in the past few days, with the asset down to as low as $49,751 on August 5. This significant plunge from Bitcoin has been attributed by many to the downturn in the Japanese markets. The Trigger in Japan Speaking on the crash, Nassim Nicholas Taleb, a risk analyst, author of “The Black Swan” and a well-known Bitcoin detractor, sheds light on the origins of the recent market disruptions that have rippled through to cryptocurrencies. Related Reading: Could Bitcoin Outshine Gold? Trading Guru Weighs In On The Historic Financial Duel On Monday, the Japanese stock market fell severely, dropping by more than 10%. The report said this plunge came “amid risk from a stronger yen, tighter monetary policy, and concern over the US recession.” The narrative begins with Japan’s economic policies, where after maintaining zero interest rates for an unprecedented thirty-three years coupled with nearly two and a half decades of quantitative easing, the Bank of Japan (BOJ) found itself cornered into a position where adjustments seemed inevitable. The abrupt decision by the BOJ to raise interest rates led to a sharp downturn in the Nikkei 225, a major stock index, which in turn sent shockwaves across global markets, including the cryptocurrency sector. According to Taleb, this sharp pivot in policy was a long time coming, as the artificial suppression of interest rates and excessive liquidity injection often come with hefty long-term costs. The Japanese approach, often hailed as a successful quantitative easing model, now faces critical scrutiny as it appears the bill for years of economic manipulation is due. Taleb particularly noted in the post on X: Nearly 33 years of (near) Zero Interest Rates (ZIRP) and 23 years of Quantitative Easing come at a price you eventually must pay. (Japan was always mentioned by the QE fools as a place where the strategy worked). Is Bitcoin Safe? Bitcoin dipped to a 7-month low during the global market plunge, dropping below $50,000. This fall impacted the crypto market so much that the total liquidations surpassed $1 billion. Given this significant negative impact attributed to the plunge in the Japanese market, some might question if Bitcoin is still safe, especially as a safe haven. However, it is worth noting that Bitcoin has since proved to be a digital asset worth considering as a safe haven when it comes to times like this. In March 2023, when major banks in the US were collapsing, Bitcoin saw a rise to as high as $29,000—a notable increase from its lowest levels below $20,000 that month. Besides, it is also worth noting that not only Bitcoin was a victim of the impact of this Japanese market crash, as several other major crypto assets, including Ethereum and Solana, experienced a drastic fall. For context, Ethereum fell as low as $2,197—a low not seen since January of this year; Solana also bore the brunt, dipping to $110. Aside from these major cryptocurrencies, traditional assets also received their share of impact, with Nvidia, Tesla, and Apple falling at least 4%. Related Reading: Investors Pull Back: $528 Million Vanishes From Crypto Funds Amid Economic Fear This shows that the recent crash didn’t suggest that Bitcoin was unsafe enough; instead, it reveals its correlation to changes in the global economic sector. Featured image created with DALL-E, Chart from TradingView
Bitcoin has led a global crypto market downturn in the past few days, with the asset down to as low as $49,751 on August 5. This significant plunge from Bitcoin has been attributed by many to the downturn in the Japanese markets.
The Trigger in Japan
Speaking on the crash, Nassim Nicholas Taleb, a risk analyst, author of “The Black Swan” and a well-known Bitcoin detractor, sheds light on the origins of the recent market disruptions that have rippled through to cryptocurrencies.
On Monday, the Japanese stock market fell severely, dropping by more than 10%. The report said this plunge came “amid risk from a stronger yen, tighter monetary policy, and concern over the US recession.”
The narrative begins with Japan’s economic policies, where after maintaining zero interest rates for an unprecedented thirty-three years coupled with nearly two and a half decades of quantitative easing, the Bank of Japan (BOJ) found itself cornered into a position where adjustments seemed inevitable.
The abrupt decision by the BOJ to raise interest rates led to a sharp downturn in the Nikkei 225, a major stock index, which in turn sent shockwaves across global markets, including the cryptocurrency sector.
According to Taleb, this sharp pivot in policy was a long time coming, as the artificial suppression of interest rates and excessive liquidity injection often come with hefty long-term costs.
The Japanese approach, often hailed as a successful quantitative easing model, now faces critical scrutiny as it appears the bill for years of economic manipulation is due. Taleb particularly noted in the post on X:
Nearly 33 years of (near) Zero Interest Rates (ZIRP) and 23 years of Quantitative Easing come at a price you eventually must pay. (Japan was always mentioned by the QE fools as a place where the strategy worked).
Is Bitcoin Safe?
Bitcoin dipped to a 7-month low during the global market plunge, dropping below $50,000. This fall impacted the crypto market so much that the total liquidations surpassed $1 billion.
Given this significant negative impact attributed to the plunge in the Japanese market, some might question if Bitcoin is still safe, especially as a safe haven.
However, it is worth noting that Bitcoin has since proved to be a digital asset worth considering as a safe haven when it comes to times like this. In March 2023, when major banks in the US were collapsing, Bitcoin saw a rise to as high as $29,000—a notable increase from its lowest levels below $20,000 that month.
Besides, it is also worth noting that not only Bitcoin was a victim of the impact of this Japanese market crash, as several other major crypto assets, including Ethereum and Solana, experienced a drastic fall. For context, Ethereum fell as low as $2,197—a low not seen since January of this year; Solana also bore the brunt, dipping to $110.
Aside from these major cryptocurrencies, traditional assets also received their share of impact, with Nvidia, Tesla, and Apple falling at least 4%.
This shows that the recent crash didn’t suggest that Bitcoin was unsafe enough; instead, it reveals its correlation to changes in the global economic sector.
Featured image created with DALL-E, Chart from TradingView
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