Bitcoin is thriving despite the global pandemic. In 2020, it reached new highs while conventional financial institutions were struggling. By 2021, it had risen to $30,000. This turbulent period has shown that Bitcoin can thrive during a recession for surprising reasons.
Bitcoin did not only emerge as the opposite of centralized banking. It was created in response to the financial crisis of 2008. The Bitcoin blockchain is inherently diversified, as any computer on the network can verify the transactions. The cryptocurrency is not tied to any specific location, or institution, and it may not be overseen by governments. At the same time, it has gone mainstream, as you can buy bitcoin with credit card on secure exchanges.
The pandemic triggered panic in the US stock market. The sell-off in March 2020 revealed how quickly fear can bring down the prices. While COVID-19 is still affecting our daily lives and business operations, it seems that the worst is over. Yet, nobody knows when the next recession will hit. One of the ways to prepare for it is to invest in Bitcoin. Here is why.
1. Bitcoin Was Built for Crisis
Bitcoin was created as a currency that would allow people to transact without bank accounts and third-party interventions. This is a non-fungible source of value. It is beyond the control of any sovereign nation.
2. Bitcoin Is Diversified by Nature
You can buy American dollars in China or France, but they will still represent the official currency of the United States and reflect the health of its economy. In addition, it is difficult to get, store and use dollars in any form except cash when you are outside the US.
Bitcoin is the epitome of wealth without borders. It is not tied to any national economy. During the recession of 2008, the ripple effects shook countries with shared economic interests like the US, the EU, and Japan. The factors swaying Bitcoin are entirely different. They include regulation, environmental concerns, institutional adoption, and mining restrictions. All of them occur on a case-by-case basis.
3. Bitcoin Is Secure and Globally Transferable
Transferability is one of the key factors underlying the price of Bitcoin, along with its limited supply and security. The number of coins that will ever be in circulation is capped at 21 million. Moreover, mining has slowed down in recent years due to the reduction of rewards. This makes cryptocurrency comparable to commodities like gold. It will maintain value regardless of how the economy performs. Whether it is expanding or contracting, Bitcoin still attracts investors.
Finally, as a store of value, Bitcoin has an important advantage over Ethereum. Its growth is not dependent on smart contracts, tokens, or other cases of practical blockchain use. The growing amount of computing power does not affect the supply. The Bitcoin algorithm has stood the test of time.