The cryptocurrency community isn’t buying a theory suggesting that a coronavirus-prompted recession will make Ethereum decentralized financial (DeFi
Investor Ryan Sean Adams made the case that efforts to mitigate the impact of an increasingly likely recession would create further confidence in Ethereum, driving DAI rates up and attracting “millions” of users.
Fear is certainly building about the spread of coronavirus and its impact on the global economy. With more than 126,000 known cases and 4,600 deaths around the world, the World Health Organization is now calling COVID-19 a “pandemic.” [The Guardian]
Chief economist at Allianz, Mohamed El-Erian, commented on the virus’ potential impact on the global economy:
“The collapse in economic activity risks being amplified by the economics of fear, uncertainty and adverse economic-financial feedback loops. I believe there is a high probability of global recession.”
Coronavirus to On-Board Millions of DeFi Users?
Like others, Ethereum proponent and cryptocurrency investor Ryan Sean Adams believes that a recession would actually make cryptocurrency more popular. With central banks getting desperate, and increasingly extreme, with policy, the theory is that Bitcoin and, by extension, other digital assets will become attractive to those looking for assets with more certain monetary policy.
A scenario:
1. Corona sparked recession
2. Interest rates go to zero or lower
3. Crypto rebounds w/ a vengeance
4. DAI interest rates shoot up
5. Millions onboard for high yield DAI
As ETH rises DAI rates increase
And ppl will realize speculation isn't the only use case
— Ryan Sean Adams – rsa.eth (@RyanSAdams) March 11, 2020
Adams says that the rising price of Ethereum during the market run up he foresees will drive DAI interest rates and the DAI savings rate up. This will, apparently, make decentralized finance
Cryptocurrency Industry Says Dream On
Numerous prominent members of the cryptocurrency industry were quick to shoot Adams’ theory. For starters, there’s little indication that a global recession would even be bullish for cryptocurrency.
After taking a battering over recent weeks, as BeInCrypto reported, prices today plunged even more dramatically. At the time of writing, Bitcoin, Ethereum, and just about everything else is in a state of free fall.
Even if forthcoming central bank policy does suddenly prompt a healthy rebound in cryptocurrency prices, many still think Adams is off the mark thinking that millions will flock to decentralized finance. Whilst some called the optimistic take “disgusting,” “desperate,” or “Justin Sun-esq” for using the ongoing tragedy to shill Ethereum, others offered more thorough critique.
WormholeOracle (@WormholeOracle) reasoned that there was just too much risk for most people to get involved with the sector. They mentioned smart contract bugs, oracle failures, and poor governance as potential reasons why users could lose funds, adding:
“8% isn’t really a juicy risk/return profile for that kind of risk.”
Finally, some offered takes that seemed a little more reflective of the current bloodshed in cryptocurrency markets. Yusuf Karmali (@YusufKarmali) presented the following “more likely scenario.”
Second (more likely) scenario:
1. Coronavirus causes recession
2. Everyone sells crypto because they aren’t save havens.
— (((Yusuf Karmali))) (@YusufKarmali) March 11, 2020
In a subsequent tweet, prior to today’s cryptocurrency market carnage, Adams agreed that further drops in prices were indeed “likely” but his theory would still come to fruition.
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