Can Bitcoin Survive a Recession?

Jeremy Bezanger on Unsplash/File
Photo by Jeremy Bezanger on Unsplash

The COVID-19 pandemic has impacted many people and businesses globally. In the beginning, this pandemic battered the economy while crashing global markets. And Bitcoin wasn’t an exception. Perhaps, this is visible from the price of this virtual currency that sunk to $4,100 at some point, its worst value since March 2019. However, this virtual currency recovered to around $6,600 when the stock improved too.

Nevertheless, some experts believe that the worst is yet to come, even as this global pandemic interferes with small businesses, daily lives, and many economic sectors. What’s more, many people argue that it’s unknown how the next recession will emerge. What some people know is how to prepare for it. Some individuals and experts believe that investing in Bitcoin is an excellent way to prepare for the next recession. That’s because they think a recession can’t affect Bitcoin.

Perhaps, this explains the high number of people rushing to buy Bitcoin. Some are even using applications to monitor the prices of this virtual currency. Ideally, you can use an bitcoin trader to monitor the crypto market and buy and sell Bitcoin from your smartphone. But why do some people think Bitcoin can survive a recession?

Satoshi Nakamoto Built Bitcoin for a Recession

The U.S Great Recession was why Satoshi Nakamoto built Bitcoin. Ideally, the widespread failure of the conventional financial system prompted Satoshi to develop a decentralized digital currency. Satoshi wanted to give the world money that individuals could use and trust without third-party intervention. And Satoshi succeeded in creating independent, non-fungible value storage.

Bitcoin’s Weakness is Its Strength

Many people see Bitcoin as a risky investment due to its decentralization and lack of backing by anything. Ideally, Bitcoin lacks any government guarantee or support by a business asset. That means an investor can’t recover anything if it folds.

While this might sound terrible, the trait has a flipside. Since Bitcoin doesn’t have a tie with any business or government, it can’t tank if a random company or economy collapses. And this is a significant strength in the ever-changing market.

Bitcoin Has a Capped Supply

Bitcoin’s algorithm has persisted over the years, earning this virtual currency credibility from many people. Since Bitcoin’s inception, its protocol has regulated its supply and ensured a constant mining pace. What’s more, Bitcoin’s new block decrease with time.

This computing power shows the Bitcoin’s demand has increased naturally over time. Unlike sawmills’ effects on the lumber market or drilling activity on gas and oil supply, Bitcoin computing power does not affect supply.

Innovation Leads to a Better Economy during Recession

Adaption and innovation are the best treatment for a recession. Surviving a recession requires individuals to adapt to new technologies. For instance, the e-commerce world and the micro-gig economy boomed during the previous recession. That means technology is an asset to individuals and companies that want to adapt.

Blockchain is already essential, making sense that it could be the vehicle to carry people out of the next recession. And people investing in Bitcoin could reap the maximum rewards when a recession comes.

Bitcoin Could Serve as Value Storage

Since Bitcoin is decentralized, its price could remain stable during a recession. Currently, some people in less stable economies are transferring money to blockchain-based digital currencies. That way, these people can preserve their money’s value.

If the Fed fails, the American households might use virtual currencies like Bitcoin as their value storage. By concept, this would imply that Bitcoin and blockchain present a recession-proof solution to fiat currency inadequacies.

Final Thoughts

No asset is entirely recession-proof. While some people think that Bitcoin could survive a recession, you can’t be sure that it will weather the storm and emerge stronger. Thus, people will know this if an economic downturn comes and leave Bitcoin stronger.

 

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