This Crisis Is Good For Bitcoin, But Beware of Recession

The current global crisis is good for crypto as it shows the dysfunctionality of the existing system, according to Marcus Swanepoel, co-founder and CEO of crypto exchange Luno. However, in case of a global recession, this nascent industry might be hit hard too, he warned.

Crypto was born out of a financial crisis, accompanied with a vision to upgrade the world to the better financial system, so “the more dysfunctional the existing system becomes, the more there’s an opportunity to showcase to the world that there is a better way to do it,” Swanepoel told Cryptonews.com. Based on the available data, one can speculate, however, where the current situation can lead, he added.

People were expecting bitcoin (BTC) to rise immediately when the traditional market started falling, yet it dropped. That’s not strange, explained the CEO. BTC is a proxy for gold, and what happens in a financial crisis is that a lot of assets go down at the same time, including gold. It follows the market “for a little bit,” and “once people have basically removed all the money, put a lot more low-risk assets, and they start reallocating, and then they go into gold and then gold decouples.” But Swanepoel said that it’s too early to make an assessment on just how correlated BTC is to other asset classes.

An argument supporting decoupling, according to him, is the rise in the number of new customers buying bitcoin.

“We measure every day how many people buy bitcoin for the first time, and that number has been actually steadily going up,” he said without specifying.

As reported yesterday, after a crypto market crash in March, the number of wallets with at least 1 bitcoin has kept rising, reaching new all-time highs.

Two months window

There’s a lot of things that are telling us that the sentiment is actually still strong on the retail market, “so it makes us think that the drop was probably more institutional/large traders that had to close positions to kind of cover some other stuff. But the grassroots level kind of adoption appears to have been unchanged until now.”

Data shows, said the CEO, that a lot of the volatility and movement we’ve been seeing is caused by either traders or big investors, not long-time hodlers.

“So our view is that it is going to decouple and, and it’s going to take some time now, whether that’s two weeks or two months,” or more, said Swanepoel, but it’ll happen. And as people start realizing there is decoupling, they will be even more new people coming into the market, and it will grow significantly.

As they feel financial losses on their assets, many will likely notice the stock market going down, but BTC not following it, and may decide to invest for the first time, Swanepoel estimated. “My expectation is that we’re talking months, not years,” he added.

However, the CEO warned that the positive trends for crypto may be stopped by a major problem: a massive global recession. Not only would onboarding go down but, despite people’s belief in crypto, even the long-term hodlers may be forced to sell their BTC to survive. If crypto doesn’t start decoupling before that, the recession would put major pressure on it. Furthermore, if the market doesn’t do well in a couple of months, many small crypto companies are going to go out of business. Finally, because of the financial crisis, the B2B (business-to-business) side will slow down, as companies will not invest in new projects.

Accelerated expansion

Meanwhile, according to the CEO, Luno is in “a good financial position” and will continue to grow regardless of the outcome.

As crypto is cheaper, and the company believes decoupling is coming, they expect to see a lot more momentum in the market in the next few months. Therefore, Luno is accelerating its expansion. Their goal is to solve a long-running issue in the Cryptoverse – the difficulty for newcomers to get into crypto. It’s still far too complicated, Swanepoel said, and Luno is working on improving the user experience, educating people on crypto, simplifying and hastening the process as well as the KYC (know your customers) procedures, but also adding more funding methods so users can deposit money quicker.

London-based Luno is one of the largest crypto-related companies in emerging markets, particularly in Africa and Southeast Asia, offering a number of products for trading and storing crypto, as well as APIs (application programming interfaces) for other businesses to link into. Per their website, Luno has local offices in seven countries on three continents, as well as 3 million users across 40 countries. The number of wallets surpassed 3.5 million, while only c. 5% of their volume is from Europe because they only recently launched there, the CEO said.

Learn more: Can CBDC Help Recover From Coronavirus Recession And Lead To Bitcoin?