A survey, conducted by Fundstrat, found that Bitcoin investors believed that it would function as a safe-haven asset during the next recession, with 72% of institutional investors agreeing with this, as compared to 59% of retail investors surveyed on Twitter.

This comes amid reports that Coinbase in planning to recruit an extra 150 staff due to institutional interest in the cryptocurrency space;

 

The notion that Bitcoin will be a safe haven during a future recession owes much to its anti-establishment, libertarian beginnings: Bitcoin’s foundations were built in reaction to the financial crisis of 2008, as libertarians believed that the public needed an alternative monetary system that would be superior to the conventional fiat system of government’s and central bank’s and its structural wealth inequality. The principle of Bitcoin gradually became more popular following the banking bailout and austerity politics with the idea that it offered individuals radical freedom in their lives and financial affairs from the oversight of those controlling the old fiat system via a decentralized network of distributed trust, in which people become their own bank, have control of their assets and the ability to trade with a certain amount of anonymity.

Although, a recent sentiment survey by Coindesk showed that the political leanings of Bitcoin hodlers has changed somewhat from its early days;

Nevertheless, will Bitcoin function as a viable safe-haven asset during geopolitical and economic uncertainty? There is contrasting evidence for this.

The most obvious example is Bitcoin’s 80% price spike of early 2013, in response to the financial plight of Cyprus, this was followed by another push higher during the debt-crises of 2015 in Greece.

Numerous other economic crises can be correlated to a surge in popularity and trading activity for Bitcoin and other cryptocurrencies such as Dash. The populous of countries facing a currency crises and hyperinflation have been given a reason to buy Bitcoin; Venezuela, Zimbabwe, Argentina, Iran and Turkey, whilst there is also an increased demand for Bitcoin in African countries facing a GDP growth slump such as South Africa, Sudan and Kenya.

Bitcoin also increased its value by 7% in response to the US government shutdown of January 2018, falling back again when a new budget was agreed by congress, but it has so far failed to benefit in any clear way from the worsening trade war between the US and China, as some expected, although gold, the traditional safe-haven asset, has so far remained in a downtrend during this trade-war, so perhaps Bitcoin has captured a portion of the gold market, despite it lacking the liquidity gateways to bonds, stocks and an ETF.

Going forward, Bitcoin will need a more liquidity gateways and simpler way for the general public to invest in it, better UIs and wallets.

https://coingape.com/cryptocurrency-will-rise-recession/

https://www.coindesk.com/no-crypto-isnt-just-for-libertarians-anymore/

https://www.bitguru.co.uk/crypto-news/coinbase-looking-to-recruit-150-more-staff-recruiting-wall-streets-finest/

22 votes, average: 4.95 out of 522 votes, average: 4.95 out of 522 votes, average: 4.95 out of 522 votes, average: 4.95 out of 522 votes, average: 4.95 out of 5 (22 votes, average: 4.95 out of 5)
You need to be a registered member to rate this.
(2812 total tokens earned)
Loading...

Responses

  1. Siddartha

    I think the true test of Bitcoin will be the future great recession (maybe due to AI). But well, why should we care. Most of the people (including me), don’t own more than a few hundred satoshis….

    (0)
  2. Indigo Ocean

    I think it is very likely. BTC is sort of like digital gold. It isn’t the best for currency, but it’s a very valuable asset. Things like DASH or NANO make better currencies, fast & feeless. We need both and in combination they will make us independent of government issued fiat currency and Fed hijinks.

    (1)
    1. sandwichbill Post author

      My guess is that it will be a safe-haven, but it won’t be apparent at first. When the next recession strikes, the large amount of private debt that individuals have will likely lead to many retail investors liquidating their crypto holdings and we’ll see price turn down, but the institutions and high-net-worth individuals will gradually buy into this liquidity.

      (0)
  3. Conceptskip

    Yes, crypto is certainly a hedge against the current financial system. But i am not entirely sure if – apart expectations – bitcoin will be able to deliver. If you look back to the price rise in 2017, a transaction cost 50$ and took 1-2 days. Whereas this could still be negligable for the really rich, imagine how clogged the system will be when not Cyprus but the whole of US or EU tries to get into BTC… it would be aweful!

    (0)
    1. sandwichbill Post author

      Interesting. I don’t actually know what the current fees and transaction times are for Bitcoin. I’ll have to look into that, because I know that the Lightning Network is only for micro-transactioins.

      (0)
  4. CryptoBiker

    When the next crash arrives, Austrian economists ( The ones that predicted the last crash) say that one should diversify their portfolio to include gold,silver, land and BTC from the ones that understand Crypto.

    (0)
  5. CryptosDecrypted

    Great stuff. I think you’re spot on that each financial crisis, however localized, opens the door to safe haven status for BTC at some point. The financialization of BTC may become a big issue through rehypothecation and comingling but hopefully, that won’t come to pass or get completely out of hand. Cheers.

    (0)
  6. Adil Elias

    That’s an interesting poll, thanks for sharing that. I think that’s an excellent news that the crypto community isn’t limited to one political faction or a single party. The last thing you want to do is to replace the real-life problems solving aspect of blockchain with political narratives.

    About the safe haven aspect… How do you think crypto stable coins would fare during a recession?

    Great post as usual @sandwichbill.

    (0)
    1. sandwichbill Post author

      Thanks, it would have been interesting to know what reasons, if any, the institutions gave for thinking BTC would function as a safe-haven
      In my opinion, I don’t think there would be anything stable about stablecoins during a recession, as they are pegged to fiat. Whilst the supply of a stablecoin can expand and contract to maintain price stability in normal market conditions, during a recession a stablecoin is subject to the same inherent problems as fiat and supply would contract. Howver, institutions will probably be holding stablecoin reserves and they may use these to on-ramp their fiat and other assets into crypto, which will increase in value against the USD, but then crypto liquidity would also be another problem.

      (0)
  7. Ilia

    We’re all afraid of uncertainty… it is possible that the next crisis is on the threshold and it is time to think that better Fiat money with their dependence on corporations and governments or crypto… I would bet on the victory of crypto! And it will be BTC or ethereum is not important. Personally, I bought some TRIBE on presale today…! And I like the Outlook of EOS! Thank you for sharing your thoughts and interesting Analytics.

    (0)
      1. sandwichbill Post author

        Thanks. I see that gold is going up and Bitcoin is going down at the moment, but anyway crypto may still do well, when the inevitable recession does strike. It’ll be interesting to see if the sp500 survives the January test.

        (0)