Greek Financial Crisis Is an Opportunity For Bitcoin

An anonymous reader writes: Greece's economy has been in trouble for several years, now, and a major vote next weekend will shake it up even further. The country can't pay its debts, and the upcoming referendum will decide whether they face increased austerity measures or start the process of exiting the Euro. One side effect of the crisis is that alternative currencies like Bitcoin suddenly look much more attractive as the "normal" currencies become unstable. "Tony Gallippi, the co-founder of bitcoin payment processor Bitpay, tweeted on Sunday night that he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exits the Euro. The currency is currently worth $250. Part of the reason why the crisis is so tempting for proponents of the cryptocurrency is the echoes of a previous crisis in the Eurozone: the banking collapse in Cyprus in 2013, which saw that nation also impose capital controls to prevent massive outflows of currency from the panicking country. That collapse came at the same time as the first major boom in the price of bitcoin, which began the year at less than $20 and peaked at ten times that by early April – before it all came crashing down."

Comments

Go away, Tony

[Anonymous Coward]

"Tony Gallippi, the co-founder of bitcoin payment processor Bitpay, tweeted on Sunday night that he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exits the Euro. "

In hopes of getting everyone to quickly buy Bitcoins so it actually rises and he can sell. Nice try.

You think Greeks want MORE electronic money?

[xxxJonBoyxxx]

>> alternative currencies like Bitcoin suddenly look much more attractive

The problem most Greeks suddenly face is that their money is now locked up as electronic balances in banks that have shut down for a week and won't let them have more than 60 euros at a time. After crises like this (even America's own "great recession"), people tend to prefer forms of money are more than just bits or fiat paper, such as gold and silver.

Re:You think Greeks want MORE electronic money?

[MightyMartian]

Because the value of gold and silver is somehow less arbitrary than electronic bank balances.

Re:You think Greeks want MORE electronic money?

[fatgraham]

I think his point was that you'd have physical access to it, yknow, to buy physical bread and milk.

Re:You think Greeks want MORE electronic money?

[FooAtWFU]

Because the value of gold and silver is somehow less arbitrary than electronic bank balances.

Depends on who's running the bank, doesn't it? The value of gold and silver fluctuate with supply and demand worldwide. They have industrial and decorative uses and a widespread base of people willing to own them. In the absence of large-scale deep-space asteroid mining technology flooding the market with excess supplies, they're going to remain fairly valuable.

A well-run bank can do much better (the value of its currency remaining approximately constant over time) but once you start instituting capital controls and swapping out the nice currency for shitty drachmas then it's another matter.

Re:You think Greeks want MORE electronic money?

[DarkOx]

That is only if it buys bread and milk. The trouble Greece and most of the modern world has is that its entirely dependent on international trade. Greece can't meet its needs by itself. I am not an expert on the Greek economy. Lets charitably assume they can feed themselves. What about all the drugs that are not manufactured there that many depend upon to live for example? Can a private individual order drugs from across the boarder with gold coins? Can a pharmacy or hospital buying in quantity for that matter?

Sure there are exchanges for gold abroad, ultimately the answer is yes; for some quantity of gold you can obtain enough Euro to buy what you need. Now if the banks are closed where you are that might mean sending someone abroad to physically execute these transactions where trading desks and banks are open.

If the economy becomes truly unhinged, people stop working, stores close, etc than gold really is not all that great. If I am hungry and you are hungry, and neither of us imagines that changing anytime soon do you think I'll trade my pound of cheese for your gold?

I am supportive of a gold standard in general because I think inflation and debt based currency is an insidious trap used to enslave all of us. A gold standard would prevent the vipers from manipulating things and causing recessions that last half of peoples productive lives, it would reduce inequality, it would reduce war, in exchange for more frequent smaller booms and busts. In short it would shrink many of the worlds problems. If you already have problems like Greece does it won't provide some magic fix, don't have any illusions about that.

Re: You think Greeks want MORE electronic money?

[Junta]

That's incorrect. Gold fluctuates pretty wildly with mass hysteria, compete with massive deflation and inflation. Much like bitcoin. Prior to the 20th century, when communication wasn't quite so instant and pervasive, gold did a pretty good job because it was rare for *everyone* to panic more or be more confident all at once.

Re: You think Greeks want MORE electronic money?

[FooAtWFU]

Gold fluctuates pretty wildly with mass hysteria, compete with massive deflation and inflation. Much like bitcoin. Prior to the 20th century, when communication wasn't quite so instant and pervasive, gold did a pretty good job because it was rare for *everyone* to panic more or be more confident all at once.

Eh. Don't oversell the old gold standard. For starters, a gold standard was typically a steady and persistent malaise of deflation, as economic output increased more steadily than the money supply. Second, this was punctuated by Fun Fun Fun bouts of inflation when something like a gold rush happened or someone colonizing the new world discovered new mines overseas. Third, the metallic standards' troubles were amplified when regimes inevitably tried to do something stupid like have currency in both gold and silver with the price ratio fixed, invariably leading to a straightforward application of Gresham's law where the overvalued money drove out the good (sometimes merely hoarding the good money, other times trading it out of the country for a better deal).

bit coin doesn't solve the strategic issue.

[nimbius]

The greek financial crisis was brought on by a neoliberal government that promised the moon and stars, never collected tax, and drove itself into bankruptcy by securing loans (some predatory) that it could never repay. 23 years of national economic policy are coming home to roost, much as they did in the united states during the housing collapse, except the frameworks are radically different.

Greeks aren't generally accustomed to paying tax. Free medical and social services, some wildly more generous than the average western nation, are normatives they enjoy, and expect to enjoy regardless of income. shifting greece from a two decade model of tax evasion to even moderate tax reform will be met with cars burning in the streets because the average greek voter isn't privy to the fact that the government, in order to remain popular and in power, basically spent itself into oblivion.

exiting the euro may be the cure. Greece seems to be a country that doesn't consider capitalism in the western sense. theyve shunned the world bank strategies of privatized education and water. Evergrowing GDP. endless investment, and cloistered monied elite don't necessarily factor into the countries priorities. It will be a hard road for greece because many other nations will be very reticent to trade after an exit, but it will also afford numerous opportunities for local industry to emerge and thrive.

Re:bit coin doesn't solve the strategic issue.

[neilo_1701D]

Exiting the Euro gives them some control over their destiny.

A country that is in such poor economic shape generally has it's currency devalued. This has two effects: first, imports are suddenly more expensive; and second exports are suddenly cheaper for the rest of the world to buy. As the economic mess cleans up, you have a capital inflow into the country, liquidity frees up and things get better.

Now Greece (or any other country in the EU): They don't have their own currency; they use the EU's. So they can't allow their currency to devalue; they are dragged along by the strength of the German economy, which effectively determines the value of the Euro. They can't control their economic destiny.

Exiting the Euro may be the only option to give the Greek economy exactly what it needs: a savage, sharp recession to flush out all the inefficiencies and get back to making stuff and exporting it. Or just producing enough for domestic consumption; that'll do. Staying in the EU probably means that it's going to be a long, drawn-out and painful process.

Re:bit coin doesn't solve the strategic issue.

[hjf]

What the hell are you talking about?
Argentina was in much worse shape than Greece in 2001. We restructured our debt (basically: screw you i ain't payin that). And guess what? We can get loans.

At a ridiculous >10% annual rate, while our neighbors get it for less than 3%.

But we can get loans. Never underestimate the greed of capitalists.

Re:bit coin doesn't solve the strategic issue.

[hjf]

It would allow Greece to freely print money as it needs. Thus, trading "debt" for "inflation".

This is what Argentina did back in 2001. We had our money at a fixed rate of 1 USD = 1 Peso. The country could only have as many pesos as we had dollars in the central bank.

In 2002 we exited this scheme and made the Peso a floating currency. This allows the government to print as much money as they need to pay public employees and local suppliers.

Is it a good solution? Yes BUT temporarily. You can live with inflation for a few years if you do things right, and use that opportunity wisely. Create industry, lay off government workers, and basically allow things to take their course.

The problem is that Argentina has been abusing this for 12 years now. Instead of getting rid of government workers, they're taking more. They're also nationalizing railways and airlines (Aerolineas Argentinas operates at a loss of $1M a day). Instead of incentives for new jobs, they're giving away money to unemployed in "social plans".

Reading the comments about Greeks I'm guessing they will do exactly what we did: Exit the euro, devaluate, cover salaries by printing more money. Take the unemployed into government jobs. Forbid utilities from increasing their price (but giving them "subsidies"). In 3 or 4 years Greece will be a FINE place to live. You'll see a lot of expensive cars in the streets, lots of new buildings, overall support for the government. The president will be re-elected with an overwhelming majority. And in 10 to 15 years Greece will be struggling again. How do I know? Because as an Argentinian, this is what i live with every day.

Yeah, I'm sure that's the answer

[cdrudge]

...he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exits the Euro. The currency is currently worth $250.

I know when my country is looking at economic collapse I'd look to move all my money into a currency that's going to double-quintuple in value nearly overnight. That's the stability I want and look for. Plus think of the literally 2 or 3 actual real retailer in the country that even know what a bitcoin is, let alone accept it for payments that I'll be able to spend my new found wealth

Austerity or...

[alex67500]

The country can't pay its debts, and the upcoming referendum will decide whether they face increased austerity measures or start the process of exiting the Euro and face even worse austerity.

FTFY.

Leaving the Euro will mean that the country has defaulted, and whatever currency they put in place will have no value at all. The government will be bankrupt and will not be able to pay civil servants or pensioners. There are only 3 ways this goes:
- Creditors accept to write-off some of the debt. They cut their losses and allow Grece to survive, in a situation which is actually bearable.
- More austerity, from inside the euro. Hard times ahead.
- Default. Chaos, Civil War.

Humanity and Finance don't go together very well...

Attractive compared to what?

[sjbe]

One side effect of the crisis is that alternative currencies like Bitcoin suddenly look much more attractive as the "normal" currencies become unstable.

Bitcoin will not be more stable or attractive than other currencies including the dollar or probably even the euro except in some weird corner cases. If someone is putting money into bitcoin because they think it is even relatively stable then they are an idiot. If someone wants to use bitcoin to transfer money then there is a relatively small risk there but you'd have to be pretty dumb to just buy and hold bitcoins for any substantial length of time. Even if Greece does exit the Euro it isn't going to make bitcoin meaningfully more sensible than it already is. If someone wants to swap currencies to hedge against currency fluctuations I can think of a huge number of options I'd consider long before bitcoin for that purpose.

Tony Gallippi, the co-founder of bitcoin payment processor Bitpay, tweeted on Sunday night that he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exits the Euro. The currency is currently worth $250.

I rest my case. If it can go up that fast then it can (and probably will) go down just as fast. Bitcoin is not a place anyone should be comfortable keeping their money for long unless they are speculating.

Re:What an opportunity!

[cheesybagel]

Yeah. Actually Bitcoin is a terrible idea. To replace one deflationary currency they can't print (Euro) for another (Bitcoin).

No my dear friend. It's fiat currency they need right now.

Re: Because the Greeks are so stupid?

[Holi]

>Bitcoin is the world's first fringe currency.

pretty sure it's not.
There have been many fringe currencies. From company chits to Disney Dollars, there have been many fringe currencies throughout history, It's just that the term had yet to be coined.

Re:Because the Greeks are so stupid?

[Spazmania]

Right. The article makes no sense. The Euro isn't collapsing, Greece and its banks are. If you have the Euros with which to buy bitcoins, you're better off keeping the Euros. Just don't deposit them in a Greek bank.

Athens has a printing press.

[monkeyxpress]

Interestingly, the National Bank of Greece is one of the eurozone institutions that has the facilities to print Euro bank notes.

Since November they have printed more than 13 billion euros of bank notes (against ELA funds) which Greeks are now storing under their mattresses.

One wonders what sorts of contingency the EU has for this. It would be the ultimate middle finger to the EU if Syriza decided to solve the ECB imposed liquidity crunch by literally firing up the printing presses, yet a uniquely convenient thing to do when stuck in a currency union. Normally, the ECB could punish them by cutting of access to the TARGET2 settlement system, but this is basically already the situation now with the ELA funds running dry and capital controls in place.

What a circus this could become.

Re:Those outside of Greece will have an impact

[NotDrWho]

There is no such thing as a magic currency that any country can use to turn worthless promises into something of value. Well, maybe the dollar, but only if you're the U.S.

The fact is that Greece can leave the Euro and print all the money it wants. But that money is going to be as worthless as the paper it's printed on and everyone will know it. No one is going to accept it for anything of value. And no one is going to loan them anything of value. So they'll be like Germany in the early 1920's, with piles of worthless paper money and a black-market/barter economy.

At the end of the day, you just can't keep spending more than you take in. It's going to collapse at some point. Greece is one of the most notorious countries at doing this, and so they're the canary in the coal mine. But the same thing is going to follow for the U.S. and many other European countries if they don't find a way to balance their budgets. Eventually the credit card bill comes due and the creditors just won't loan you any more money.

Re:What an opportunity!

[Tyrannosaur]

You should trust trustworthy algorithms, not just all algorithms. Bitcoin in particular is a pyramid scheme algorithm.

Yes- but you can trust it to be a pyramid scheme algorithm.