Can Bitcoin and Cryptocurrencies Create a Safe Haven Investment in Times of a Global Recession?

The world has faced quite a number of economic recessions over the years. The latest financial meltdown in 2007-2008 caused a massive loss in property and jobs the world over. Analysts predict an upcoming recession in the next year or two given the rising interest rates, global political tensions and grumpy leadership in the world today. As the world steps up to adjust and avoid the recession, blockchain experts believe various cryptocurrency options would provide a safe haven in case the worst happens.

The Upcoming 2019-2020 Recession

The former chair of the Federal Reserve, Janet Yellen, is one of the high profile figures to prophesy an upcoming recession the near future. Yellen termed the current system “a system with gigantic holes” in a speech made in December 2018 on the current economic state of the United States. As the largest economy in the world, a recession in the country would affect almost every part of the world – Europe, Africa, Asia, and Australia.

The Fed rates were paused earlier in the month, a move welcomed by IMF’s new chief economist, Gita Gopinath, citing the potential global risks and a darkened economic outlook. The chief economist at the International Monetary Fund said,

“The fact that the Fed has put a pause on the raising interest rates is going to provide a lot of support to the economy. We endorse the Fed view of having a data-driven approach.”

The world’s top economy has been growing consistently since 2009, making the period the second longest economic boom in history. The stocks and financial asset market has grown substantially in the last decade raising even more fear of an inevitable recession.

While the year of recession switches between 2019 and 2020, among different analysts, the fact remains that a recession is inevitable given the current global economic conditions.

Will Cryptocurrencies Provide A Safe Haven?

One factor that has come into the conversation regarding the recession is blockchain technologies and associated cryptocurrencies. The industry was not formed by the time the globe experienced its last economic recession which has raised ideas of cryptos becoming a safe haven. The co-founder and COO of CryptoCake and COO of Webglobal Holdings, Lee Zuckerman, believes investors will run to the cryptocurrency market in times of a recession to find protection.

Lee further sees the prices of cryptocurrencies sky rocketing during the year as the world turns to the industry to seek shelter. On the 2008 financial crisis, Lee said,

“People would have been protected [if cryptocurrencies were available], maybe they wouldn’t have lost their homes.”

Cryptocurrencies As A Store Of value

Ian McLeod, an analyst for Thomas Crown Art, also believes top cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) will be vital during the recession. According to Ian, BTC and ETH is a store of value that can be used as a safe haven in case of a recession. He compares the two with gold saying investors may see crypto as a robust way to store their wealth. With the world turning to digital assets and adoption in the industry increasing, the analyst believes the crypto field will provide a suitable haven for people in the coming years.

“As the world moves from fiat money to digital, and as an adoption of crypto picks up, there can be no doubt that cryptocurrencies will be firmly in the pantheon of safe haven assets within in the next decade.”

However, a recession does not provide the answer for the crippling crypto prices as explained by Tone Vays, a longtime analyst in cryptocurrencies and blockchain technologies. He says in times of recession, investors would be wary of putting in more money into speculative assets and instead would be more willing to cash out.

Other motives such as replacing cash with digital money to reduce money laundering or excessive control by governments on people’s bank accounts can cause a boost in adoption. However, these are less likely to happen even in a global recession hence the long wait to reach global adoption.

Publication date: 
02/11/2019 - 17:34