Bitcoin Forum

Hi Everyone,

There has been something on my mind for last couple of weeks and that is:

Is Bitcoin going to be the best hedge in the upcoming financial crisis?

Let's assume for a while that the financial crisis will break wide open in either late 2019 or at latest early 2020 - we live in everything bubble era.

What do you believe will be the ultimate hedge and why do you think that?

In 2008 crisis it was US treasuries and gold as it rose sharply in 2009, 2010 up to 2011 I don't think that would be the case this time as the mobility matters more and more.
I can't speak for US treasuries as I don't understand them that much let alone understand why would anyone invest in anything that does not even cover (real) inflation which in my opinion is about 7 - 10 % per year depending on where you live and things you buy.

In my opinion it will be Bitcoin (BTC) as it's the oldest, largest crypto with the largest hashing power behind it.

I would appreciate your comments and opinions.

Edit 17/12/2018: As some people thought I'm looking for an instrument that will not take ANY loss - that's not the case here - I'm looking at an instrument that will not stay down for say longer than 3 months.

Edit 19/12/2018: This assumption/planning/thought is for rich people - people who can barely afford food and just got laid off will not invest in anything (maybe lottery tickets if they want to call it investing).

This video can give you an idea.

Escaping the Global Banking Cartel - Andreas Antonopoulos

https://www.youtube.com/watch?v=LgI0liAee4s&t=1s (https://www.youtube.com/watch?v=LgI0liAee4s&t=1s)

i don't think there is any ultimate hedge in case of  a global financial crisis. and bitcoin is not yet ready for that kind of adoption although it has a lot of potential to be one. so i'd say bitcoin would be a pretty good choice but it can't solve all the problems.


"bitcoin core" is the name of a full node/wallet not the coin itself. the coin is simply called "bitcoin".

During crysis investors switch from high risk/ volatility assets (stocks) to low risk/volatility assets (gold, materials) to simply decise loss. Even if gold will decline too it will for sure decline less then stock. How about bitcoin? Well its high volatile and very high risk asset. So im my opinion it will be first to be dumped (and it happend in december 2017). In my opinion bitcoin was first asset dumped in incoming crysis. Next was small stocks from emerging market and S&P now.

In crysis time we could see bitcoin beeing dumped even harder (simply people will need money to live for not to invest in high risk assets). Even some life-time hodler will have to sell BTC to buy bread. But knowing the fact that average fiat currency lives 27 years, then we see hyperinflaction and devaluation. If, during cryusis, some fiat currencies will be under hyperinflation citizens of that country may run to bitcoin what will push price up making bitcoin first asset beeing pumped after crysis (or even during).

I diversify my porfolio. I still hold bitcoin (life-time hodl :) ) but i also have short positions on some stocks.

I think that bitcoin will suffer as much as fiat or more in a financial crisis. It's not proven itself to be a store of value and is still highly speculative in nature. Therefore people won't look to move from stocks (risky) to bitcoin (way riskier) if they're facing a financial squeeze.

I have already watched this and if Andreas is rights the answer would be "yes" but I asked for your opinion - fellow users of Bitcointalk.

bitcoin core - ok fair point I put in the brackets the ticker instead (BTC), my point is that it's not confused with any of the forks.

Regarding the crisis - I don't mean crisis where the electricity stops working and those who have canned food, guns & ammo are the ultimate winners. I meant something at the 1930s or 2008 level.

Therefore I don't expect that all the banks and all the cash will be distrusted and the only way to go forward would be crypto money - this might happen at some point but probably will take one or two more crises.

there is no ultimate hedge. in a serious market contraction, everything will crash. on top of that, debt monetization has pumped all markets---even gold and bitcoin have benefited from it.

a global crash definitely means a risk-off investment cycle. this early in its life, bitcoin is still considered a high-risk/high-reward investment, so money would likely flow out of the bitcoin markets and into safer havens.

People always seem to only think how a financial disaster will affect Bitcoin, but they forget that Bitcoin itself is hugely volatile, and it won't stop being volatile during any dramatic events in economy. So, you might try to use it as a hedge and then encounter some uneplainable price moves like a 20% crash or pump in a matter of hours. This unpredictability can make it a very poor hedge - people who are scared to lose 30% of their value in the long run might lose some 10% in one moment if they panic sell.

That is what many speculators are saying and the financial crisis has started.  I will keep holding the little I have and to trade them in future.  Remember that blockchain technology is transparent, decentralized and it is not control by any governments or financial institutions therefore it will be the best hedge for dollar and other currency.

I agree with the first part of what Tytanowy Janusz said, during crises people are known to stay away from higher risk assets and bitcoin being volatile doesn't help that either so it surely is not the "ultimate hedge" against the financial crisis.

but bitcoin being what it is, has always been acting separate from any other market. for example when other markets are falling bitcoin has been rising in the past or vice versa. it always moves on its own and on top of  that being a global asset it doesn't take effects from local incidents that much.
so in my opinion in case of a financial crisis bitcoin would either not be affected at all or rise at least a little.

You're right, actually in September 2008 even the gold was down for a month and a bit and then it went on one hell of a rally. With that in mind I just changed the subject of the topic from "Is Bitcoin the ultimate hedge against the upcoming financial crisis" to "Is Bitcoin going to be the best hedge in the upcoming financial crisis?"

My point is - after the dust settles in something like late 2020 or early 2021, are we going to see Bitcoin thrive (price wise, adoption wise) or is it going to two digits and on verge of being almost forgotten?

The next Bitcoin halving will be on circa 26 May 2020 - probably right in the middle of the financial crisis - this should affect things. If I remember correctly last buildup started in fall of 2015 when we went to bottom of about $180 and then 9 months later it was already on the run and if it wasn't for the Bitfinex hack probably by end of summer 2016 we would have had $1000; instead we had to wait for it till January of 2017.

If history tends to repeat itself the next buildup will start in fall of 2019 if not earlier however the crisis might intervene with this...

I think it can be said like that because the price of bitcoin from 2009 to 2018 has a very sharp decline even exceeding the crisis in 2013.

Bitcoin has existed only during a time when the overall markets were very bullish. Real estate, stocks, gold, and others have been in raging bull market ever since the recovery from the 2008 crash.

That's why I think it's dangerous to assume Bitcoin won't be affected by global market trends or financial crises. It's never experienced a major global downturn before.

This is what I've been thinking recently. We've never had Bitcoin in a financial crisis, companies dealing in Bitcoin still file for bankruptcy like all other companies. I think at some point we might end up with a gold/stocks sort of system when things are considered too huge to fail and then artificially proped up by a government somewhere.

Gold doesn't have inflation but when it leaves the vaults, it's inflated because its owner is no longer hodling if in its value and it becomes available to the open market. The same can happen to Bitcoin.

That's very fair point - we never had global financial crisis and Bitcoin, hence it's in the speculation section.

When a huge global financial crisis happens it just happens to everyone, there is absolutely no way of running from it.

Stocks will fall, crypto will fall, gold will fall, house value will fall. There will be nothing that will profit you at the time of an economical crisis, you will lose money no matter what you are invested into. There is no running away from this at all. Hence there is absolutely no way of profiting neither.

In the end crypto is used to the volatile world whereas other methods take years to recover so the best move you can make is stay on crypto and take the hit and just hope that you will win the recovering race compared to other investment methods.

I still prefer diversification and putting my money into multiple stuff but in the end none of that matters during a huge global crisis.

I believe that people do consider it to be a good hedge, let's take the example of the Asian country India. Two years ago there was demonitisation in their country, and suddenly everyone bought bitcoins to hedge their looses and it's pertinent to note that bitcoins began to sell at a premium there. I believe bitcoins has become popular all over the globe, and gold shine has worn off as it's illiquid at times, hence I believe bitcoins can be used to hedge against the finicial crisis if it happens.

I don't understand why everybody thinks there is going to be a recession just because the stock market has fallen close to the yearly open.

The economy is not in bad shape and the reason why the stock market has fallen so much is due to the FANG stocks which were over-valued to begin with. Every Tom, Dick and Harry was buying AAPL and Facebook they assumed it would keep going up forever and little did they realize that it was way over-valued as it was. No different than the Crypto bubble at the beginning of the year.

You can always play the short side. I've been itching for many years to trade the ultrashort S&P 500 ETF and other similar instruments, but I'm patient enough to wait for a real bear market. I've watched too many short traders get slaughtered over the past several years to fade the stock market myself. It's the same as watching Bitcoin bears during bubbles.

I just wonder how long it'll take me to recognize it, and how much that'll cost me. Most people won't see a real crisis coming. That's why I don't expect one now. Everyone is ready for blood.

That's not true - if you look at the graphs Gold was 1 month in red but then it run like crazy.

Just to clarify - I'm not looking for an instrument that will 100 % shield me from any loss period I'm looking at something that will not stay ridiculously low for say more than 3 months when there is blood in the streets.

It is a good theory that bitcoin as a digital form of gold would be used to hedge against the impending financial doom, but bitcoin seems to follow the same patterns as regular trading markets, so if those fall then bitcoin is also likely to fall

You are asking for input that no one here can provide. It's all up to you to take that risk, because even if we all largely agree that x asset will be doing fine during difficult times, it may still dump just as hard as the rest of the assets.

It wouldn't surprise me if we end up going through a time where assets dumps simultaneously and there is no safe haven at all. There is not much you can do to weapon yourself against that.

My personal hedge is strictly Bitcoin. I accept it completely if it ends up doing the opposite of what I expect it to do during difficult economic times. Maybe that real estate can be added to that later on, but who knows.

Yeah, inflation does depend on those things.  In the US where I live, and for the things I buy, inflation is nowhere near 7-10%.  Inflation hits some goods & services more so than others, and the data the US government gives is based on a "basket of goods" if I'm not mistaken, and it certainly doesn't measure everything that's bought or sold.

Anyway, if your investment doesn't at least keep up with inflation then you're obviously losing money.  One of the facts that precious metals hucksters keep repeating over and over is that a silver quarter can still buy a gallon of gas and therefore silver is the best hedge against inflation.  Do I believe that?  Absolutely not, though I don't think it's a horrible idea to buy some metals right now.  They've taken a serious beating since 2011 and may go up again if any sort of crisis hits.

Bitcoin, though?  Come on, I couldn't think of a worse inflation hedge, even at the price it's selling for right now.  Why?  Because any safe-haven, inflation-hedging asset should not be as volatile and prone to bubbles and crashes like bitcoin is.  It may be an excellent way for a trader to make money from, assuming that the price appreciates in the long- or short-term, but there's no way I'd feel safe using it as a hedge.  It's around $3400 as I write this, and it could drop to $1000 by tomorrow morning for all I know.  There's too much uncertainty and too much volatility, and traditional inflation hedges lack those two features. 

Even though I don't buy into the propaganda the gold & silver permabulls keep promulgating, I agree with their point that neither metal is going to drop to zero, since both have actual real-world uses.  Bitcoin probably won't drop to zero, but there's more of a chance of it doing so than metals--or even stocks with solid companies behind them for that matter. 

I'm hoping that this discussion turns out to be pointless and that we're not staring down a global economic crisis, but I do feel the bad vibes that are going around and I do get the feeling that something bad is going to happen.  I can already see some of it in the stock market, though I've been expecting a major correction for quite some time now.  For bitcoin, I'm hoping 2019 turns out to be a better year than this one.

To be honest I'm also hedging with Bitcoin (BTC) but I was hoping somebody will come with some solid argument that the US treasuries, Gold or something I have never heard of will be the winner and support it by some solid reasoning.

That didn't happen [yet] but thank you for sharing your thought.

Well not sure if you meant that it's actually higher or lower but if you look at thing like Chapwood Index, Big Mac index or M1 Money supply with data provided by FED (https://fred.stlouisfed.org/series/M1 (https://fred.stlouisfed.org/series/M1)) you will quickly realize it's at least 7%.

I agree with the argument that the metals will probably never go to zero but at the same time I strongly believe that it's days as future go-to store of value are numbered because of its limited portability.

When the crisis occurs. almost all commodities experience weakening. which is why many people go bankrupt during a crisis and crypto too. especially crypto including a very sensitive and volatile market. of course the economic crisis will greatly give bad affect to the market

Real estate is tied so closely with economic health though. With housing prices endlessly rising over the same period that wages are stagnating and growth is topping out, we have to expect a crash to heavily affect real estate, just like 2008. In fact, I think stocks and real estate will suffer the most.

When everyone is losing money (through investments, loss of business, layoffs) the last place people invest money is illiquid assets like houses and multi-unit complexes in an overinflated market that's finally tipping over.

I hope to see that but in my opinion we should not look at the past of bitcoin. In 2014 we had mostly nerds without speculation knowledge just enjoing having bitcoin. Now we have lots of high class speculants. Price will act different because different types of investors are  holding bitcoin. We are on unknown waters.

With this one I agree - illiquid assets will be probably the biggest loosers. Some stocks with insane valuations will maybe finally land on Earth (FAANG).

But I suppose person who lost their job will not be investing in anything, they will be buying food and that's about it. It's a good point though I solely assumed a rich person.

I agree that's very good point. So what is your thought - will those new rich individuals buy more or dump crypto?

I completely agree with your points. However, it really depends on the type of crisis that hits, whether hyperinflation, recession, etc.

I think that gold will still be seen as a hedge, if a financial crisis does come. People naturally revert to gold whenever there is financial instability, which could explains why gold prices rose so much post-GFC.

But gold is just too indivisible, too inconvenient, and has a high entry bar for regular investors who want to store their wealth in a safe haven. That's why I also believe that bitcoin will be seen as a feasible alternative due to its convenience, as it is also completely independent from the traditional fiat system in times of crisis.

There might not be huge spikes in price, but its value should hold relatively well in the long run due to its limited supply and detachment from the fiat ecosystem.

Normally, when there is economic or financial crisis, it is a normal thing to see people trying to find a space they can easily get into to hedge their funds, and basically, I would not be surprised to see this as a space a lot of people will want to get into for that reason. However, we still have to understand that this is a new market, so we just have to wait to see how the reaction would be like, but there are so many other ways to hedge, it just depends on which is readily available the most anyway.

Yes I also personally see the days of gold as the best hedge numbered for the same reasons as you do. I would be glad if somebody stepped in and convinced us otherwise - assuming it can be done.

This is the big question for the next couple of years. Will Bitcoin act as a hedge or will investors dump Bitcoin that they see as their highest risk asset? Will the fact that as the larger economy and stock markets start tanking Bitcoin is bottoming mean that it will be a hedge there aren't a lot of weak hands in it? Will the next crypto boom take place as normal entirely un-correlated to the wider economy and traditional markets over the next 2-3 years? Will the economy keep Bitcoin down for a couple years, delaying the next bull run/boom?

I have no idea. For now I'm assuming the crypto market will continue to operate on its own and we'll see another boom over the next 3 years, even as a recession hits and stocks are getting pounded. I think some people will move from stocks into Bitcoin, some people will drop Bitcoin, and in the end maybe it will be a wash so the next bull run happens as usual. But only time will tell!

the decoupling as the stock market dumped the last couple days was an interesting sight. i have to say, that wasn't my expectation. a short-term divergence from the correlation between stocks and bitcoin, but i'm not sure how much credence to give it.

to some, the market has already entered crash mode based on new yearly lows. to others this is max pain before the market wicks back up and traps bears. if doomsday has really arrived, then i think we'll see the correlation return when the reality sets in that the market is really crashing this time. just like gold in 2008. i'd really love to be wrong though since i keep a lot of my net worth in bitcoin for reasons other than investment.

Bitcoin is superior to Gold in almost every way, so there isn't anything people can say to prove otherwise. The only thing however is that most of the traditional farts will very likely continue to ignore all our arguments as to why Bitcoin is so much better. Even when they start to realize that you are right, they will probably never admit it.

In the end, it's not even our problem that they are too close minded and stubborn to admit the usefulness of Bitcoin, because it's their loss if they don't adapt. Bitcoin is less than a decade of age, yet it's covering 1% of all the Gold in the world in terms of market cap. I'm pretty certain that within 10 years we should be able to see Bitcoin climb up to 25% at minimum.

From criminal money to an x trillion dollar asset, not bad. ;D

it could happen without anyone knowing in the future because crypto currencies were created using current progress and technology to answer the needs of a growing economy

Asides from bitcoin even being separate from other market, it is still very much new, and what really gave birth to it in the first place was a result of the financial crisis that ended in 2008. How bitcoin would respond to the next crisis is something we will just have to wait to see with time, but I believe one way or the other, among other things, it will serve the main purpose for why it was created in the first place which due to its deflationary features, can serve as an hedge during such period, but time will tell.

I think it'll take a poo and remain a poo, however you could take a contrarian view.

If every conventional investment dives towards the ground there'll still be a lot of money looking for a home to do something other than sit there or disappear.

Bitcoin and buddies have flashed potential but certainly haven't fulfilled it yet. Everything else has been established forever in comparison. A cynical whale, and I presume there's nothing other than cynical whales, could initiate a pump and potentially spark a stampede of idle or hurting money looking for anything with a glimmer of growth potential. In addition to collapsing horrendously, crypto can certainly grow violently when it's in the mood.

We always talk about people not taking risks because they have to pay their mortgage. We don't need to give a shit about mortgage paying people. It's the properly deep pockets who'll decide.

Financial crisis is here and bitcoin has not skyroceted yet. American stocks are incredibly low, they have fallen as much as they did back in 2008 according to another topic here and that means the crisis already begun and no increase sight in scene. Yes, bitcoin went from 3 thousands to over 4 thousand but it went back to 3 thousands once again and even the 4 thousand wasn't really a big increase. The price needs to be at least over 6 thousand once again in order for us to say "recover" let alone anything remotely near the 20 thousand dollar line.

Hence, I doubt the financial crisis will have any affects on bitcoin at all for now, maybe in the future when FED keeps the strict investment rules there will be some rich folk preferring bitcoin over stocks and savings because of bad returns on them but that would take years to have any affect on the price and would be gradual and not instant results.

not even close! in the 2008 crash, the s&p 500 index fell ~56%. the current drop (from the ATH earlier in the year) only amounts to a 17% decline. it's been a rough few months, but nothing compared to 2008 yet.


i don't see any signs of financial crisis. the stock market looks like we shouldn't expect a new ATH for a few years, but i'm not convinced that this represents a crisis or collapse like many people think.

Bitcoin maybe used as hedge during financial crisis as most of the currencies especially the major one can be sweep during the crisis.  Bitcoin did not much depends on inflation figure and others financial issues and that put it in the best position to become investments window during financial crisis.  Remember that bitcoin is transparent, decentralised and it is highly reliable. 

Yup. I dont get how so many already call we have economic crysis.

It has to happen and so far I hoped it would happen after next Bitcoin bubble. But right now I dont care anymore. All that economic crisis will do is to postpond the Bitcoin cycle for a year and after that bull market will be only stronger.

Bitcoin will regain its market value when people and investors will put back their money. It actually bitcoin never be a solution for the possible crisis and we can't depend on bitcoin cause once financial crisis arrive it also affect into its market value(going down also).

It's impossible to know. It could steer this market to record highs, or have it suffer with it, but one thing is sure, continue to buy whenever you can now the prices look reasonably fair. Regardless of the economical circumstances we'll be going through, Bitcoin itself will only become stronger.

The coming few years will be Bitcoin's best years in terms of technological progress. We have some killer upgrades waiting to be released and Lightning continues to grow as well. I'm more bullish on Bitcoin than ever before. Eventually, the price will move far ahead of the actual utility in form of the next bull run. It's only a matter of time.

The only thing you can do is make sure you hold enough coins before it starts. Buy. :)

I wouldn't say that bitcoin is guaranteed to not stay down for more than 3 months.

However, if you look at it from the perspective of whether people would want to be in an asset class which is decentralised and people know is a good store of value and isn't manipulated by any central entities, or rather assets that have ties to the traditional economy within a financial crisis, I think that most people would want to hold the former.

It's the reason why precious metals have performed well in times of financial crises around the world. Bitcoin can serve a similar role here.

Is it going to be the best hedge? It's hard to say, but it will be a hedge against any upcoming financial crisis in my opinion. It's certainly going to be comfortably outperforming assets like shares, or potentially even fiat cash itself.