Opinion: Cryptocurrency grasped mainstream attention back in mid-2017, but the world’s first digital currency, Bitcoin (available on Coinbase) (BTC) was born back in 2008 and introduced to the world in 2009. Around this time, the stock market collapsed and fell 777.68 points within a single trading day.

The cause? The subprime mortgage crisis. U.S. banks got greedy and granted mortgages to individuals that couldn’t actually afford them, and there weren’t enough mortgage-backed securities to feed the demand. Home prices fell in 2006 and it triggered massive defaults across the nation. The risk then spread to pension funds, mutual funds, and corporations who owned those derivatives.

Ultimately, the mortgage crisis threatened many government-sponsored agencies that required a government bailout. Banks and Insurance agencies began seeking bankruptcy and in Sept-2008 the first bank bail-out proposal was denied by Congress. To help restore financial stability the Fed doubled its currency swaps with central banks in Europe, England, and Japan. The governments of the world had to provide liquidity for the U.S’s frozen credit markets.

In October 2008, Congress finally passed a new bailout bill, but the damage was already done. Thousands of jobs were lost, and it was deemed one of the worst recessions in U.S. history, just behind the great depression. Bitcoin (available on Coinbase) was created in response to the chaos noted above and was ultimately made to become an alternative to our current financial system.

Current Banking System Downfalls  

Paper money was originally created because Gold and Silver was difficult to divide and transport. Then, banks started giving out more money than they had gold in their vaults. Thus, “fractional reserves” were born and banks began collapsing due to runs on the bank. Central banks were then formed to become the last resort to lend smaller banks liquidity. Banks still got in trouble, but now if one bank was in trouble – they all were. This is where governments step in to save the banks like they did back in 2008.

Back in 1971, Richard Nixon severed the ties between the financial system and gold. The president decided that USD would no longer be exchangeable for a fixed amount of gold and now, banks have No Limit on the amount of paper money they can create. From this moment on, all money was created as “credit.”