If the global system hits rock bottom, crypto comes to the fore

• Crypto has been floated and driven by cheap money created by quantitative easing 
• The macro indicators that made big tech attractive will make crypto attractive
• The failures of the global financial system last year weren’t pronounced enough

Crypto could do better than almost all other assets if there’s a global recession according to Sergey Nazarov, cofounder of Chainlink. He told CNBC’s Street Signs Asia that the purpose of crypto is to create an alternative financial system that can’t be subject to the kinds of failures a global recession could create. 

Is the recent rally sustainable? 

We’ve seen coins like Bitcoin, Ethereum, Solana start to move to the upside again in the last few days. Is this a sustainable rally? 

Nazarov: Crypto, like big tech, has been floated and driven by cheap money created by quantitative easing and federal funds and interest rates that are extremely low. Crypto has followed the market indicators of big tech very closely in the past year or two. The macro indicators that made big tech attractive will make crypto attractive unless there’s a large global recession.

If there is one, crypto is an anti-inflation hedge. If recession comes, then crypto outperforms all other assets because the purpose of it was to create an alternative financial system that can’t go through the types of failures a global recession could create. 

Things weren’t “bad enough” 

About crypto potentially being an inflation hedge…last year crypto was whacked on the head and inflation surged, so that argument didn’t work. What can give crypto the life that it needs now? 

Nazarov: If there’s a lot of cheap money, then that will float crypto, like it has in the past couple of years. That dynamic has driven global markets pretty substantially. In terms of the inflation hedge scenario, I think it wasn’t bad enough. The failures you saw in the global financial system weren’t pronounced enough. 

There were still questions about recovery and the system working. If the system hits rock bottom, both expressed by inflation and solvency issues with traditional institutions historically considered reliable, then the thesis of crypto as an alternative financial system will come to the forefront. Things weren’t bad enough (last year).