Bitcoin: A safe haven in times of economic recession?

[TheGhostMan]

Again The US economy continues to show negative numbers, which could affect world finances. What role does bitcoin play here?

          First, I want to emphasize what an economic recession is or entails. Occasionally, recessions can be caused by factors beyond anyone's control, such as problems in other nations or changes in the global economy. Sometimes they are the result of bad decisions made by organizations or governments. Whatever the cause, the end result is always the same: the economy shrinks and everyone suffers as a result. A global economic downturn could have great effects on other nations and people around the world. Given the size and strength of the US economy.

The alarm of a possible global recession continues to sound, while the leaders and regulators of the United States deny the seriousness of the crisis. However, new data on the behavior of the economy of this country suggest a difficult outlook. In this context, Bitcoin has an opportunity to test its use cases.
According to information from the Federal Reserve, money market funds are having aggressive growth. But why did this worry economists? Well, money market funds are highly liquid investment products, just like cash and government bonds. Investors usually use them when they want to invest their capital with minimal financial risk, especially in contexts of great economic instability.

Figure 1: Money market funds serve as a liquidity buffer in crisis situations.

Fountain: https://twitter.com/cryptoquant_com/status/1675678718659006464/photo/1.

          The graph above shows that the use of money market funds has increased exponentially during the periods immediately preceding economic crises or recessions. Analysts have noted that this pattern tends to repeat itself during difficult times, such as the 2008 economic crisis and the coronavirus pandemic.

Figure 2: Dates of the private debt peak (green dotted line), the oil peak (red dotted line), and the Lehman bankruptcy (black dotted line).

Fountain:https://www.rankia.com/blog/game-over/3144683-petroleo-causa-crisis-2008.

Figure 3: Economic recession in times of the coronavirus pandemic.

Fountain: https://www.bbc.com/mundo/noticias-55802814.

          From any point of view, a global recession is worrisome and, above all, alarming to see how the US authorities minimize the severity of the crisis. While it is 100% understandable that people's perspectives on the economy differ, but you have to know how to recognize the data that paints a challenging picture. The importance of approaching things from a balanced angle should not be ignored. The bitcoin cryptocurrency is highly speculative and volatile. Although some investors have experienced sizeable gains, there have also been instances of sizeable losses.
          In my opinion, honestly these global recession alerts, I feel like Bitcoin has a chance to show its great potential. Bitcoin has the ability as an option to wait and be taken into account for these uncertain times, the risks are known but its rewards are also perfectly known, I can only say that we hope that this does not happen to majors, despite the fact that it may be the BTC a way out of this problem we have to take into account that many people are not involved or soaked in information in this world of cryptoactives, the crucial and main thing in this type of case is to thoroughly investigate Bitcoin, understand how it works and determine if it is fits our financial objectives and risk tolerance.

I would like to know what you think about this topic, I read them...
Fountain:https://www.criptonoticias.com/mercados/nuevas-alertas-recesion-puede-hacer-bitcoin-contexto/

[dothebeats]

This has been talked about countless of times here in the forum. As I always say, bitcoin can be used as a means to safekeep the value of assets while the world around us is melting. It retains value pretty well compared to other asset classes out there that are susceptible to crises such as this one. Though one thing to keep in mind is that there is no guarantee in bitcoin or any other crypto for that matter. While in the past, it is relatively safe to leave your money in bitcoin and expect that it will still have the same valuation, or sometimes even greater, we can't tell for certain if that will be the case in the next coming years.

[BenCodie]

Fantastic post OP. Before I say my of opinion, let's concrete the facts, so that my theory isn't confused with what I believe to be a more likely view of the future:

- There is no doubt doubts that during a recession that is fueled by inflation, Bitcoin's value will grow exponentially.
- Bitcoin should be able to serve as a viable store of value if liquidity is not interfered with by as powerful or more powerful entities.
- Everyone should have some Bitcoin at this point, as a serious global recession is undoubtedly looming (and has been for years).

Now for my theory...
This unprecedented show of support to "Test Bitcoin's Use-cases" sounds way too good to be true. In what world would we think institutions like the fed or conglomorates like Black Rock would support Bitcoin as avidly as they are now? For the fed especially, it is destroying their own system IF Bitcoin proves its use case.

Which leads me to ask, and think, is this a ploy to publicly manipulate Bitcoin to disprove its use case, rek as many people are possible and entrap them into fiat money? At least until manipulation is simply no longer possible due to the resources which it would require to sustain.

It's an unlikely theory...though a possible theory nonetheless. Let's just hope that Bitcoin is as we think, being an inflation and fiat system failure hedge.

[Wend]

No, how can a highly volatile asset become a safe haven? When it comes to a safe haven, it means that the asset is stable, unaffected by a recession or crisis. Gold will be our safe haven in times of crisis, not bitcoin. The proof is you look at what happened during the crisis in 2022 when inflation peaked due to covid and war, and bitcoin depreciated more than 80%, how can it be called a safe haven? 

The original purpose of bitcoin was created with limited supply to fight crisis and inflation. But so far, it is being used as a highly volatile and speculative asset, so it is not yet a safe haven.

[serjent05]

No, how can a highly volatile asset become a safe haven? When it comes to a safe haven, it means that the asset is stable, unaffected by a recession or crisis. Gold will be our safe haven in times of crisis, not bitcoin. The proof is you look at what happened during the crisis in 2022 when inflation peaked due to covid and war, and bitcoin depreciated more than 80%, how can it be called a safe haven? 

The original purpose of bitcoin was created with limited supply to fight crisis and inflation. But so far, it is being used as a highly volatile and speculative asset, so it is not yet a safe haven.

I also agree that it is somehow doubtful that Bitcoin can be a safe haven during the recession.  Since Bitcoin price is fully dependent on supply and demand, there is a huge possibility that its market will not perform well as the values of items go up in price.  Bitcoin is not a cure-all pill that can solve everything.  With its high volatility feature, I also wonder why it can become a safe haven during economic recession.

[PX-Z]

Many people and called "experts" said the same but the result always in the opposite a bit. Look at the of pandemic, it was hit hardly that it feels so much in march the start of lock downs of countries. But of course it recovers just like the other assets after a month or two, good thing it grows so much after few months.
The same thing when the war between Ukraine and RU last year. So what do i mean, bitcoin has a potential to be a safe haven but not yet because it still have get affected—a huge effect from the regulations, world economic crisis and etc.

[GreatArkansas]

(...)
The original purpose of bitcoin was created with limited supply to fight crisis and inflation. But so far, it is being used as a highly volatile and speculative asset, so it is not yet a safe haven.

You have a point here, but for sure people are making conclusions or just speculating because recently Bitcoin is making huge pumps and they find it more profitable which they don't consider the volatility.
Let's say they compare the Year-to-date (YTD) gains of non-cryptocurrency assets to Bitcoin, and they find Bitcoin is better. Which for me, it's not a valid comparison.

[SquirrelJulietGarden]

You have a point here, but for sure people are making conclusions or just speculating because recently Bitcoin is making huge pumps and they find it more profitable which they don't consider the volatility.
Let's say they compare the Year-to-date (YTD) gains of non-cryptocurrency assets to Bitcoin, and they find Bitcoin is better. Which for me, it's not a valid comparison.

They can be right with thinking that global recession and high inflations of fiat currencies which can not be stopped by central banks, will help Bitcoin to gain its price and move up higher and higher. The inaccuracy is they think it will shoot out instantly after a few weeks or several months. It is unrealistic to think so if they see how long does it take for the Covid-19 to cause negative effects on global economy.

Like it is impossible in 2009 to think Bitcoin will be traded after next 6 months because of global economic problems circa those past years. It takes 14 years for Bitcoin to be traded at today price and it needs years, not months.

Generally, there is no safe heaven for everyone. A heaven for me can be a hell for another person because this market is zero-sum game.

[Iranus]

- There is no doubt doubts that during a recession that is fueled by inflation, Bitcoin's value will grow exponentially.

And we are in crisis, the highest inflation in 40 years, have you seen bitcoin exponential growth? Or is it still 50% lower than ATH? Like what Wend mentioned, how can an asset with so much volatility become a safe haven for our assets? And do you have any solid evidence about the future of bitcoin? Bitcoin is still being considered a risk asset "invest what we can lose", I hope you haven't forgotten the mantra.

@serjent05, you are right, bitcoin is not a panacea for our world, many people are too crazy about bitcoin and too delusional about it.

[jasonjm]

Bitcoin is considered an inflation hedge by many because they think it is a very good investment in a recession. However, we have seen many times in the past that when there is a certain economic crisis the price of BTC is dumped, In this scenario, I think, it is too early to say anything regarding bitcoin.  

[Don Pedro Dinero]

This has been talked about countless of times here in the forum. As I always say, bitcoin can be used as a means to safekeep the value of assets while the world around us is melting.

Yes.

No, how can a highly volatile asset become a safe haven?

It is as simple as that to be a safe haven you have to HODL it for at least 4 year periods. Volatility has nothing to do with it. Look at the graph of gold at the time of hyperinflation in the Weimar Republic. Wasn't gold a safe haven then either?

https://twitter.com/DylanLeClair_/status/1396518689177063429

[posi]

It is as simple as that to be a safe haven you have to HODL it for at least 4 year periods. Volatility has nothing to do with it. Look at the graph of gold at the time of hyperinflation in the Weimar Republic. Wasn't gold a safe haven then either?

Holding 4 years minimum can't be called a safe haven, I think it's an investment. Because in my opinion, gold is a safe haven because we can sell it whenever we need money, and we hardly lose value.
It is not entirely true to say that bitcoin is not a safe haven, but given what bitcoin has achieved so far, it is not yet a safe haven. Bitcoin remains a highly volatile speculative asset with an uncertain future. But over time, as it becomes widely recognized and accepted, bitcoin will become a hedge against inflation as well as a safe haven.

[Kakmakr]

Well, we can only look at the history to see what will happen in the future... because it tends to repeat it self. What did people in Greece / Zimbabwe / Cyprus do when their economy nearly collapsed? The Banks closed their branches and ATMs to prevent a Bank run and they limited the withdrawals of the clients. (Hyper inflation nearly killed the value of their local currencies)

Then people realized that their wealth are being eaten by hyper inflation and they started to buy bitcoins. (Some people bought Gold and precious metals) .... so people saw the potential to use Bitcoin as a safe heaven. 

[Blitzboy]

No, how can a highly volatile asset become a safe haven? When it comes to a safe haven, it means that the asset is stable, unaffected by a recession or crisis. Gold will be our safe haven in times of crisis, not bitcoin. The proof is you look at what happened during the crisis in 2022 when inflation peaked due to covid and war, and bitcoin depreciated more than 80%, how can it be called a safe haven? 

The original purpose of bitcoin was created with limited supply to fight crisis and inflation. But so far, it is being used as a highly volatile and speculative asset, so it is not yet a safe haven.

A "safe haven" does not necessarily guarantee peace and quiet. Bitcoin doesnt have to conform to the textbook definition of a "safe haven" in order to serve that function.

Bitcoin's high return potential is a direct result of its volatility. While its true that Bitcoin's value fell during the financial crisis, a lot of so-called "stable" assets suffered, too. What counts most is development and growth after a catastrophe has occurred. Bitcoin's resilience suggests it may be used to weather economic storms.

Remember that Bitcoin is a technological breakthrough as well as a financial asset. The promise of blockchain technology is what gives it true value, not its current market price. Bitcoin's true strength lies in its potential to radically alter the monetary system in ways the world has only just begun to grasp.

[Outhue]

A safe haven? That's a very wrong way to put it OP.

Bitcoin is a very volatile digital asset, it's not recommendable for those who want to store value for some time, if you want to do that I think CBDC is better if it's already functioning in your country, USD stable coins are good too but I can't say that they are completely safe either.

You can store your 30,000$ in Bitcoin right now and in a week time your 30,000$ turn into 27,000$, that means you are down 3,000$, it's better to store money that you are ready to use as investment in Bitcoin only, not a safe haven that can maintain your exact amount of dollar, you can lose some or gain some, that's why it should be treated as an investment asset.

[WatChe]

A safe haven? That's a very wrong way to put it OP.

Bitcoin is a very volatile digital asset, it's not recommendable for those who want to store value for some time, if you want to do that I think CBDC is better if it's already functioning in your country, USD stable coins are good too but I can't say that they are completely safe either.

You can store your 30,000$ in Bitcoin right now and in a week time your 30,000$ turn into 27,000$, that means you are down 3,000$, it's better to store money that you are ready to use as investment in Bitcoin only, not a safe haven that can maintain your exact amount of dollar, you can lose some or gain some, that's why it should be treated as an investment asset.

Volatility is the main reason Bitcoin still is not getting mass adoption and is also the reason of its massive popularity. The volatility of Bitcoin is in both direction i.e. in up and down both directions. Even the currency rates these days are not stable as inflation is high all around the world. If one think that Bitcoin is not a safe place to store Bitcoin then neither is Fiat currency.
If you are keeping your money in Bitcoin for long term then surely you will get good ROI but if you are looking to invest for a week or two then you wont get real benefit of Bitcoin.

[Plaguedeath]

I'd say there's no currency or asset is safe haven except agriculture.

Check Bitcoin, gold, real estate, stock etc during bad economy situation e.g. the recent is coronavirus pandemic, you will see all of them were declining. It's because there's not many people have idle money to invest due to fired from the company or the business become not profitable.

But anyone will still need to buy foods to survive, this make agriculture has no impact with bad economy situation. It's not mean agriculture has no risk, every investment has always a risk.

[slaman29]

I agree it's a "Safe haven" for a long period of time. Compared to currencies like my own and all the friends I know who struggle every day with daily expenses rising and costs of everything going up while salary remains the same and savings interest isn't matching inflation.

But BTC vs USD ever since the economic recession has been terrible, USD hit all time highs against so many currencies while BTC is still less than 50% of USD ATH. So what's this talk about safe haven? Why can't Bitcoin just be a normal long-term savings 10-year value going up deal?

[tread93]

The economic outlook for the US looks pretty rough ngl. The US has put some bandaids on by raising the debt ceiling but when the US defaults on its loans and can no longer delay it and inflation continues at this rate it will cause a huge effect on all global markets to the brink of collapse. One would think that in these conditions that BTC would have a chance to shoot up and find a new all time high, its certainly possible! Only time will tell what will happen.

[Ever-young]

Safe heaven mean the asset won't experience any form of negative impact on its price and value. But I don't see Bitcoin as such, Bitcoin happens to be volatile in nature which could even make the holders have a worst expirence compare to what the economic recession might have caused, this could be as a result of a heavy price drop on Bitcoin price. When the price of Bitcoin happens to drop very high which where investors could be recording up to 30-40% loses on their capital in such a case I don't see Bitcoin as a sure heaven.

The only difference between keepings your assets in terms of economy recession, is base on the fact that Bitcoin price could be one an either results which could either be positive or negative. And the user won't have to worry about bankruptcy providing that it's Bitcoin is being stored in an None-custodial wallet where full control is in his possession.