Many may not remember the 2008 crisis caused by major investment banks, credit institutions, and even the government. Considering the average age of today’s cryptocurrency investors, most were young or children during those days. However, it is crucial to understand the 2008 crisis, the birth of Bitcoin, and what is happening today because all these will give us ideas about the future.
Bitcoin Purchase Ban
Merrill Lynch, the third-largest investment bank in the USA, was one of the hardest hit by the 2008 crisis. Lehman Brothers was not as fortunate and was allowed to go bankrupt. However, Merrill Lynch was acquired by Bank of America for $50 billion during those days, possibly under government advice or even pressure.
Today, if we see headlines about Bank of America’s investment arm Merrill Lynch imposing a ban on spot Bitcoin ETFs for its clients, it is because Bank of America saved it from bankruptcy under government duress. Today, the BofA-backed bank’s image looks great, but those who remember 2008 know the past story and can read today better.
After Vanguard, the second-largest asset management company in the US, Merrill Lynch also restricted its clients’ access to spot Bitcoin ETFs.
The 2008 Crisis and Today
The 2008 crisis occurred in plain sight, yet the greed for making money surpassed the fear of leaving people unemployed and starving. The government knew what would happen when it allowed companies to leverage up to 15 times. However, the dazzling white collars of government officials who had been transferred from financial giants made it easier for them to turn a blind eye.
Banks that gave loans easily to people with very low incomes were selling these loans to management companies, which then issued them as CDOs. At the end of the day, we saw a process where big banks took positions against their clients, making money as they lost it. CDOs were getting the highest ratings, so everyone was eager to invest in them. The AAA rating, which should have been given to a handful, was roughly given to 4,000 CDOs. This was because Moody’s and the other two largest credit rating agencies were making more money the more they gave out the top rating.
S&P, Moody’s, and Fitch would later tell Congress and in court that these ratings were their own opinions and would eventually get off scot-free. Everyone was content. Those who took out mortgages they couldn’t afford had no idea what was coming. Loan consultants were happy with the bonus payments they received for every victim they trapped, despite the inflated real estate prices and variable interest rates. AIG was not holding cash for the debts it insured, and no one asked what this nonsense meant.
At the end of the day, Bush would have to approve a $700 billion bailout package, and the lucky ones like Merrill Lynch would be saved, while Lehman would be thrown out as a sacrifice.
Soon after, Nakamoto launched Bitcoin and embedded The Times’ news from January 3, 2009, into the Genesis block;
“Chancellor on brink of second bailout for banks.”
Looking back over the past 15 years to today, on one side, trillion-dollar giants are integrating Bitcoin into traditional finance, while on the other, those who were unashamed in 2008 are describing it as “risky and prone to fraud.” This includes those like Merrill Lynch, which survived the 2008 crisis with a lifeline from Bank of America.
Today is full of contradictions, and the future may well see Bitcoin in its second phase, turning into a scam similar to the 2008 crisis. Afterwards, Bitcoin may resurrect and regain its true identity, not as a patch to traditional finance as it is today, but as a real alternative. During this period, those who do not care about its philosophy and are solely focused on making money (98% might be optimistic, 99% of them have this perspective) will be able to make money due to global inflationary environment, income inequality, and many other reasons, and these people may not be entirely wrong in their perspective.
