Fintech, Bitcoin and the Banks: War, Marriage or None of the Above?
Technology has come to finance to stay. What can Bitcoin do in the middle of this?
The pandemic has served as a catalyst for many processes. And, in many ways, it’s been very revealing. I mean, many assumptions have been refuted. And many other things have been reaffirmed. It’s interesting to review, at the beginning of 2021, the 2019 predictions about the future in a kind of before and after. The Bitcoin narrative had many hypotheses about banks, the dollar and crises. But I’m afraid that many of them didn’t come true. However, Bitcoin is thriving for other reasons. We’re talking about Fintech, Bitcoin and the banks in a post-public world.
The early Bitcoin community was basically made up of libertarians, anarchists and cypherpunks. That is, the original group emerged from the counterculture. A strong ideological component was obviously there from the beginning. The thing about small, inconsequential groups is that they live forever in opposition. Therefore, they are always right. Radicalism grows easily when theories can be maintained in the hypothetical. Of course, once the group becomes larger, things are forced to change. In many ways, they moderate themselves. The Bitcoin community has been undergoing a very significant gradual demographic transformation over the past 5 years.
Retail speculators played a major role in the 2017 boom and institutional investors are now taking over. This new group is becoming the new majority. But that’s not all. With their arrival, they are changing the narrative. That is, Bitcoin is more popular now. Their buyers are more conventional. Consequently, their community is more conventional. Although there are still many old-school libertarian influencers, the center of gravity is shifting to the big institutions. In other words, Bitcoin Benefit review is becoming more like Wall Street.
I remember as yesterday the predictions of the most well known bitcoiners about the future crisis. In January 2020, there was talk of the end of the dollar, of high inflation, and the fall of the banks. And not only that. It was said that people would buy Bitcoin because of a hecatomb of the system. Bitcoin was presented as a lifeline in the end times. In many ways, Bitcoin, for the libertarians, is a messianic movement. And the narrative is primarily based on fear, imitating the habits and tone of the golden beetles. This revolutionary Bitcoin is important to many. But it’s not the only Bitcoin that exists. The libertarian utopia is very important to libertarians, but once you get out of that little circle, people have no idea what they’re talking about.
Bitcoin’s behavior during the crisis offers enough evidence to cast doubt on many of the libertarian hypotheses. To begin with, the behavior of the dollar and inflation during this year. Additionally, the huge correlation between Bitcoin and other risky assets. It’s not just that the libertarian hypotheses failed. It’s that they failed hugely. Almost everything turned out to be the opposite of what was predicted. The crisis generated deflation. And the panic consolidated the strength of the dollar as a safe haven, generating a crash for Bitcoin and the other financial markets.
Despite having very bad futurists, Bitcoin thrived in 2020. Why did this happen? The pandemic accelerated the digitalization of the world. And, because of the deflationary crisis, central banks were forced to inject astronomical amounts of liquidity into the system to boost demand. This gigantic shower of money greatly benefited technology companies. Everything related to online trading and digital payments received great support. In other words, the fintech sector became one of the centers of attention of the moment. In other words, Fintech is the future.
Paypal, Stripe, and Square are in fashion. But it wasn’t just online payments that gained new popularity during the pandemic. Companies like Robinhood and TD Ameritrade also took a big leap in the same period. Online trading became a trend, but online speculation also became a trend. But not in the context of a liberating revolution. What we actually have in a technological boom that embarks Fintech, online trading, logistics, renewable energy, Artificial Intelligence, the cloud, Big Data, blockchain, bitcoin and automation.
What we are experiencing is not the collapse of the system. Quite the contrary. What we are experiencing is an asymmetric recovery that has benefited the technology sector quite a bit. The banks have suffered from the increase in defaults due to the crisis. These are cyclical companies that register many losses in times like these. However, the pandemic has shown that banks have an extremely important role to play in the fintech of the post-public era. Banks are investing in technology and it’s being adopted. JP Morgan, for example, has as many developers as Google or Facebook. Of course they are adopting. And, in many areas, they are leading the technology race. The end of banking? I don’t think so.
The funny thing is that during the crisis people reaffirmed their confidence in banks. I am referring to custody services. Payments can be made in many places. But, sooner or later, everything ends up in a bank. This is not a hypothesis. That’s what happened in 2020, revealing the dynamics that could occur in the future.
What we could have is a love triangle between banks, fintech and bitcoin. The manager of a large hedge fund in New York is not buying Bitcoin right now, because he thinks the system will collapse and wants to promote the libertarian utopia. His intention is much less political and more financial. The institutional investor is always looking for trends and knows very well that fintech is the future. If Paypal, Square and others are buying Bitcoin, that means that Bitcoin will play a very important role in the fintech revolution.
Everything seems to indicate that the dollar will not collapse in the near future. We won’t see the end of the central banks anytime soon. Or the end of the banks. Surely we won’t have a Bitcoin pattern on a global level as many libertarians aspire. The supposed separation between the state and the economy will remain for a long time in the imagination of the most idealistic. However, Bitcoin as a speculative asset will be part of the fintech revolution. Therefore, a highly attractive article for investors around the world. That means that the price will continue to rise for quite some time. We’ll have better narratives in the future and the liberators will lose their prominence in the years to come. But Bitcoin will thrive. Fintech will prosper. And the banks will have a role in this story.