Quote: (12-30-2017 04:55 PM)bucky Wrote:
So, here's a question that may or may not be stupid: say this is true and stock prices dip a little and it does trigger a massive sell off and collapse in stock markets worldwide. In what way would that affect cryptocurrencies? Would they fall like stocks, go up in value, or is there no good way to say?
Crashes tend to be infectious, like when the housing bubble of 2007 pulled everything else down with it.
What will happen may be something like this:
- Stock markets crash
- Overleveraged speculators are unable to pay the banks the couple of millions that are owed to the banks
- Plus the banking sector itself invests in the stock market, thus losing a lot of value
- In effect the banks run out of cash, both from defaulting stock speculators and from the inability to turn their stock into cash (because the stock price is relatively worthless)
- This causes the banks to throttle lending and get hard ball on collecting any other debt; this leads to a decrease in consumer credit and business credit;
- The fall in overall credit offerred causes the economy to slow down and reduces growth
- Lack of growth and opportunity makes people run to the banks to take their cash, because they are struggling to make money in the real world economy, which only freaks out the banks more and may cause the collapse of weaker banks (because they will no longer be able to give their customers, the ones with savings accounts, any money - because they're 'savings' were all tied up in worthless stocks and debt)
- Collapse of even one bank will lead to a collapse of trust in the system and people will rush to withdraw their cash, ultimately leaving the banking system with nothing. Credit offerings will disappear.
- Since the modern day economy heavily relies on credit for growth, this causes the economy to collapse as a whole
- With increasing unemployment and poor business performance, people will sell their assets to put bread on the table
- Cryptos will generally be sold and demand for cryptos will be sluggish (you can't eat cryptos, and in a depression people are mostly concerned about paying for the necessities, not for assets); this will lead to a relative oversupply of people trying to get rid of cryptos, leading to a collapse in crypto price.
That's my 2c.