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How Covid accelerated the financial revolution of Bitcoin according to Stanford historian

Photo of: Joseph Stone
by Joseph Stone

While there seems to be light at the end of the tunnel with regard to the coronavirus crisis, it is time to take stock. More than just a health crisis, COVID-19 has impacted all areas and changed behaviors. Historian Niall Ferguson of Stanford University recently gave his views on the current monetary revolution and the impact of COVID-19 on it.

For the historian Ferguson, a monetary revolution was already under way before the coronavirus crisis. For him, the main target of this revolution was cash. Thus, before the crisis, countries such as China or, closer to home, Sweden, had already embarked on the road to cashless, a cashless society. More generally, in many other countries such as the United States, South America or Africa, the number of card transactions has far exceeded the number of cash transactions, and this has been the case for many years.

For him, therefore, COVID-19 was merely a catalyst in this revolution. Indeed, the different containment measures applied in many countries have prompted people to change their habits. For example, during containment, online shopping has been the main focus. Conversely, the use of cash has decreased drastically, partly for health reasons.

“What would have taken 10 years was achieved in 10 months. People who would never have taken the risk of making online transactions before were forced to do so for the simple reason that banks were closed (during lockdown). ยป

Moreover, Bitcoin’s recent performance can be explained by the return of the spectre of inflation in our societies. Faced with the devaluation of currencies, a direct consequence of inflation, Bitcoin has asserted itself as a solution to “protect your money” according to Ferguson. More than ever, Bitcoin competes with gold. In fact, some people no longer hesitate to call Bitcoin “electronic gold”.

Ferguson has three reservations about the future of Bitcoin: the cost of transactions, the slow processing of transactions on the Bitcoin blockchain and the lack of infrastructure to use Bitcoin. However, this should not discourage investment in Bitcoin. Indeed, Ferguson is convinced that the current economic situation is favorable to Bitcoin. Moreover, the two major advantages of Bitcoin, its scarcity and its sovereignty (decentralization), largely outweigh the above-mentioned reservations.

For him, the development of Bitcoin will depend very much on its ability to attract large investors. According to Ferguson, if “the millionaires together decide to invest 1% of their wealth in Bitcoin,” the price of Bitcoin could eventually soar to around $75,000.