Oddly, the Coronavirus could save cryptocurrency from Mr. Market. To explain, Coronavirus hysteria is pushing Coin Prices up and down.
Mr. Market paid $9,923.22 for a Bitcoin (BTC) on 23 February 2020; for instance. In contrast, Bitcoin had a Coin Price of $6,412.28 on 23 March 2020. Thus, Coronavirus drove the Coin Price down.
Dramatically, Bitcoin’s Coin Price fell to $4,649.76 on 16 March 2020 and $6,209.54 on 28 March 2020. Meanwhile, Bitcoin’s Market Capitalization fell from $180.035 billion on 23 February 2020 to $88.331 billion on 12 March 2020 to $113.585 billion on 28 March 2020, CoinMarketCap calculates.
Can Coronavirus Destroy Cryptocurrency?
I suspect fear drove Bitcoin’s Market Cap collapse. To explain, some people got afraid Bitcoin could lose its value or the internet could shut down.
Consequently, those people pulled their money out of Bitcoin. However, the hysterical began buying Bitcoin again when they realized the internet was not shutting down.
Thus, I do not think Coronavirus could destroy cryptocurrency. However, Coronavirus can affect cryptocurrency’s value.
Could Coronavirus Destroy Stablecoins?
Interestingly, one top 10 cryptocurrency gaining value or market share on 28 March 2020 was Tether (USDT), Coinmarketcap reports. However, they base Tether’s value on the US dollar because it is a stablecoin.
To explain, had a $4.664 billion Market Cap and a $44.011 billion 24-Market Volume on 28 March 2020. Notably, Tether’s market value went up by 0.19% on 28 March 2020. The day after President Donald J. Trump (R-Florida) signed a $2 trillion stimulus package.
Hence I think Tether’s value fell because of all the hysteria about economic collapse and 20% unemployment rates in the United States. To explain, people think the dollar will fall. Therefore, those people sell dollars or Tether and buy cryptocurrency.
Accordingly, EOS’s (EOS) Coin Price rose from $1.78 on 12 March 2020 to $2.27 on 23 March 2020 to $2.16 on 28 March 2020. I suspect people are selling dollars buying cryptocurrency because they think it has less exposure to the U.S. economy. In contrast, EOS had a $2.62 billion Market Cap on 28 March 2020.
Therefore, I think Coroanvirus could destroy stablecoins because it can destroy the value of fiat currencies such as the dollar. I think a probable outcome is that people will sell the currencies of countries seen as vulnerable to the Coronavirus, such as the USA and buy currencies of countries less affected by the pandemic, such as China.
One result of that will be to wreck US dollars stablecoins and raise the price of Yuan or Swiss Franc stablecoins.
Could Fed Account Fight a Recession?
One interesting solution to the economic crisis Coronavirus could trigger is to give every American a Federal Reserve account. In fact, Vanderbilt Law Professor Morgan Ricks wants to give all Americans access to same Federal Reserve resources as federally chartered banks, The American Conservative reports.
“The Fed has maintained bank accounts for banks and other financial institutions for a long time,” Ricks told Harper’s Washington Editor Andrew Cockburn. “They love them. These accounts work great, offer high interest, real time payments, and no possibility of default. So they’re very attractive.”
Ricks proposes the Fed issue such an account to every American citizen. In addition, the Fed could create a Fed Pay app similar to PayPal that allows all Americans to access their Fed Account from their phones.*
Advantages to Fed Account could include fast payments, real-time payments, no interest balances, and on minimum balance accounts similar to the ones PayPal offers. Disadvantages include unfair competition to private banks, and the need to create an interface between Fed Account and payment devices such as cash registers and automatic teller machines (ATMs).
Stimulus by Fed Accounts
Thus, the Fed could stimulate the economy by giving money to people who could spend it.
For instance, the Fed could distribute U.S. Senator Mitt Romney’s (R-Utah) $1,000 stimulus check to every American via Fed Account. Therefore, the Fed could distribute $3.31 billion in stimulus to all 331 million Americans.
Notably, Congress passed and Trump signed a $2 trillion stimulus bill that contains $1,200 stimulus payments for every America adult on 27 March 2020, CNN reports. Additionally, the stimulus bill pays families $500 per child.
The hope is that ordinary people will be more likely to spend than banks or big business. For instance, ordinary people could take their check to the liquor store or the grocery store.
One advantage is that people could use PayPal, Apple Pay, or Google Pay to spend the stimulus money at the cash register or on Amazon (NASDAQ: AMZN). However, I do not know if the federal government has the expertise to set up Fed Account.
On the other hand, Apple (NASDAQ: AAPL), Visa (NYSE: V), PayPal (NASDAQ: PYPL), and Alphabet (NASDAQ: GOOGL), have that expertise. Visa claims its payment platform can process 1,700 transactions a second (TPS) or 102,000 TPS a minute. Meanwhile, Statista estimates PayPal processed $199.4 billion in payments during 4th Quarter 2019.
Therefore, companies such as PayPal and Visa have technology to make Fed Account work if government taps them. Consequently, I think the Federal Reserve will need help from Silicon Valley and the credit card companies to set up Fed Account.
How the Fed Fights Recessions
Hence, Ricks wants to nationalize banking and replace most banks with the Fed. The advantage to that system is that as a Central Bank, the Fed can create money. Thus, the Fed can create money and distribute it to ordinary Americans.
Therefore, the Fed can fight economic downturns and recessions by distributing cash to ordinary people. Currently, the Fed can only distribute stimulus money to banks and hope they spend the money.
In fact, former Federal Reserve Chairman Ben Bernanke literally begged the U.S. Congress to spend money during the Great Recession of 2007-2010, Eza Klein and Annie Lowrey point out. However, members of Congress were too afraid of libertarians such as the Tea Party to Act.
Instead, the Fed made vast amounts of additional credit available to banks and other business. In essence, the Fed pulled America out of the Great Recession by issuing vast amounts of debt; mostly bonds. However, little of that money reached ordinary people.
This failure has led critics such as former Presidential candidate Andrew Yang (D-New York) to propose a universal basic income. Yang’s Freedom Dividend; for example, distributes $1,000 a month to every American over 18.
Currently, Uncle Sam could lack the resources to distribute either Romney’s stimulus or Yang’s Freedom Dividend.
In fact, the Federal Government lacks the resources to print or mail checks on the scale, Romney proposes, Cockburn observes. However, the Social Security Administration (SSA) sent electronic funds transfers to 69.333 million Americans in February 2020.
Therefore, the SSA could send Romney’s $1,000 payment or Yang’s Freedom Dividend to 69.333 million Americans each month. However, the majority of Americans could be left out.
How Fed Account could Reach most Americans
On the other hand, 81% of Americans owned smartphones in June 2019, the Pew Research Center estimates. Therefore, over eight of ten Americans could download and use a Fed Account or FedPay app.
Hence, I think a combination of a FedPay app, direct payments to Social Security Recipients, and EFT to bank accounts could help most Americans access a Fed Account and receive money. In addition, we distribute a Fed Card debit card to any American who asks for one.
An interesting idea is to have the SSA mail a Fed Card Debit Card out with every paper Social Security payment. Notably, my parents receive regular paper statements from the SSA.
Finally, we could make it easy to establish a direct connection between Fed Account and existing payment tools such as Visa, PayPal, bank accounts, Apple Pay, etc. Thus, the Fed could distribute to most Americans fast.
Is Fed Coin the Answer?
Additionally, the Fed could create a Fed Coin, a central bank issued stablecoin. To each FedCoin will contain a mechanism, a digital robot, that distributes one U.S. dollar when you spend it.
The stablecoin technology already exists and works. Speculators bought or spent $59.366 billion worth of Tether (USDT) on 24 March 2020, CoinMarketCap estimates.
Therefore, Fed Coin is technically possible. In addition, Fed Coin could create new financial markets and add income to the economy. However, there is no guarantee ordinary people will accept or use Fed Coin.
Conversely, I think people will adopt Fed Coin if they can spend it through familiar mechanisms such as credit or debit cards or Amazon. Hence, Coronavirus could lead to government or central bank issued cryptocurrencies or stablecoins and drive the mass adoption of cryptocurrency.
For instance, a central bank could send 1,000 Fed Coins to every citizen’s Fed Pay account during a pandemic, recession, or crisis. In addition, the Fed’s Board of Governors and not Congress could activate the Fed Coin stimulus. Hence, we could send Stimulus fast without politics or bureaucracy.
Therefore, coronavirus could lead to a vast government financed cryptocurrency boom.
Originally published at https://marketmadhouse.com on March 28, 2020.