Talks in the Eurogroup took place Yesterday. Greece didn’t manage to reach an agreement with its eurozone creditors.
Despite its original intentions, Athens rejected eurozone’s demands as the Greek finance minister ultimately described them as “unacceptable”. In his statement after the Eurogroup, he claimed that the text in the draft shown to him was changed during the Eurogroup meeting with a document he could not accept.
The creditors really have Greece on a tight leash as they told Greek officials that they have until Friday to request an extension to the current bailout or Greece will face the possibility of losing the pending funds. Yanis Varoufakis, finance minister of Greece stated the following when answering questions after the Eurogroup:
“I have no doubt that within the next 48 hours Europe is going to come together and we shall find the phrasing that is necessary so that we can submit it and move on to do the real work that is necessary,”
Varoufakis’ statement is highly contradictory to the gloomy mood in reports from the foreign media. No one can predict the outcome of the upcoming talks at this point. However, claims that Greece could exit the Euro zone are nothing more than baseless speculation at this point. Both Athens and its partners expressed willingness to come closer to an agreement and Syriza has repeatedly stated that this is not by any means one of their plans.
Bitcoin has benefited from political and financial instability in the past, what about now?
In the past, bitcoin has come out as a winner at times that desperation, uncertainty and doubt where overwhelming mainstream markets. It gained a lot of media attention during 2013 when Cyprus locked bank accounts for several days and ultimately sized all deposits greater than 100,000 euros from the country’s two largest banks. Such a tactic had never been used within the eurozone. It caused a lot of panic, this way helping bitcoin get coverage from mainstream media as some Cypriots tried to use it as an escape from the financial dead end that they found themselves in.
This time, there’s also a lot of uncertainty surrounding Greece’s current situation. Withdrawals from Greek banks before the elections reportedly exceeded 15 billion euros as many Greeks and foreign depositors were afraid of the outcome. Athens Stock Exchange General Index closed with losses of 3,83% on February 16th, the day of the most recent Eurogroup. So, could Greece’s situation have a similar effect on bitcoin?
Looking back at the long rally that started after the events in Cyprus in 2013, it’s worth noting that this was the first time that bitcoin got mainstream attention. Many people got to hear the word “bitcoin” for the first time due to media coverage. It most certainly wasn’t just the Cypriots that caused bitcoin price to spike. It was all the non-conservative investors worldwide that were pouring cash into bitcoin after they got to hear about it. Nevertheless, bitcoin is not at this point anymore. Bitcoin got the chance to come out of the underground thanks to the events in Cyprus and this is something that can only happen one time.
The worst case scenario for Greece and how it would affect bitcoin
While Syriza claims that austerity has dried up the Greek economy, austerity measures where one of the conditions set by Europe for Greece to receive their support. If Athens fails to reach an agreement with Europe soon, the Greek economy would be destabilized even more. We could see more Greeks losing faith in the banking system rather than the euro.
Greece could become an example of how big of a setback maintaining a fractional reserve banking system can be for a country under financial distress. In fact, the Greek banking system has already been experiencing heavy pressure over the past years. And that’s where bitcoin comes in. Because if people lose faith in banks, what’s next? After all, that’s what bitcoin is all about according to its creator. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
