Would Bitcoin (BTC) be a safe haven in case of an economic crisis?

Ever wondered how would a potential economic pullback or recession / mini-recession affect BTC (or crypto in general)?

There are multiple schools of thoughts on this one and we would like to share some opinions.

When the market for any form of perceived value suddenly seizes up, its owners automatically gravitate toward stores of value they perceive are more stable, sane and secure. Over a longer-term time frame, only gold has had reliably stored value for generations.

In times of recessions people seek flight to safety.

Read: Kraken is top 10 exchange for the last 3 years which lead us to write our Kraken review.

In terms of only crypto world, bitcoin is the safest coin so altconis would probably crash hard while the escape to bitcoin would happen. However, bitcoin itself is risky asset compared to gold.  While many in crypto space label bitcoin as digital god, it is still a luxury not a necessity and it hasn’t yet proven out its safe haven properties.

So, probable initial reaction to recession would be atlcoins crashing and bitcoin falling moderately.

What happens after the initial phase is the interesting part. If it is just a regular recession bitcoin will stay down until the storm passes. But if what we get is anything like ’08 with bank failures and government bail outs, then bitcoin will take off.

Bitcoin is not a hedge against a recession or inflation (yet), thats still golds role. Bitcoin is a hedge against banks. If banks begin to suspend withdrawals or start going bankrupt like in ’08 thats when bitcoin shines.

The biggest issue for bitcoin in this case would be  uneducated people that never heard or barely heard of bitcoin. Good luck explaining them that crypto is safe during a crash. All they hear from mainstream media is exchange hacks and people who lost a million in bitcoin they bought years ago because they forgot where their private keys were.

The concept of ‘being your own bank’ doesn’t get through to the majority of people; it could take generations/several back-to-back recessions to overturn public trust in banks.

Another huge question is what happens during and after a recession. What if bitcoin falls massively during a recession and then bubbles immediately afterwards? This is what happened with gold during the last recession. When the great recession first hit, gold initially fell along with stocks. Then, after the recession ended, gold immediately went into a multi-year bubble. This site seems to claim that quantative easing and a bunch of other factors caused the bump in gold prices, and notes that many commodities increased in price at the same time gold did.

So at the beginning of a recession, at least initially, the price of bitcoin will not rise significantly. But during, after, and before a recession, anything can happen.

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Sarah Wurfel
Sarah Wurfel

Sarah Wurfel works as a social media editor for CaptainAltcoin and specializes in the production of videos and video reports. She studied media and communication informatics. Sarah has been a big fan of the revolutionary potential of crypto currencies for years and accordingly also concentrated on the areas of IT security and cryptography in her studies.

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