Crypto might become a reason for the next financial crisis

Metalla Royal & Streaming CEO of precious metals, Brett Heath, talked about the next financial crisis which cryptos might cause.

Metalla Royal & Streaming is a Canada-based company founded in 1983. The company’s current net worth is approximately US$1 billion. The company provides exposure to precious metals through royalties and flows of gold and silver. The CEO of the company announced that crypto is gradually leading us to the next financial crisis.

Heath compared cryptos with the technological collapse triggered by the mortgage crisis of the early 2000s and 2008.

Reasons why financial crisis can occur

Heath underlined several similarities with all that happened in financial problems over the past few decades. He pointed out the main similarity: the large-scale adoption of a new financial product or a less popular new technology that is not well understood.

Heath brings an example of the mortgage crisis of 2008. At that time, people will have adopted many mortgage-backed securities and mortgage debt. Once the public welcomed it, this new financial product collapsed. Heath considers this as a huge problem.

The CEO describes crypto as “a license for the private sector to print money.” He questions the amount of liquidity that has flowed into the market since the beginning of 2020.

Heath compared the M1 (total circulating funds in circulation) in the U.S. and pointed out that since January 2020, M1 has “increased four and a half times.” According to the Federal Reserve, M1 had increased from 40,180 in January 2020. Billion U.S. dollars to around 18,935 billion U.S. dollars in April 2021. Heath emphasized that it is impressive growth and in a very short. However, if you use the total market value of the crypto to look at the crypto, it is more than ten times.

Heath seems to be concerned about the systemic risks of large-scale investments in asset classes that he considers “no intrinsic value.”

Bitcoin as a store of value will surpass gold’s predictions, and supporters of precious metals don’t seem to be worried. He also questioned the view that Bitcoin’s maximum supply of 21 million gives it scarcity or value. According to Heath, other less valuable cryptos have support from what he calls better technology.