Bitcoin ascent amid conflict? | Arabian Post
Amidst this appalling crisis, the value of Bitcoin, a digital currency often categorised as a “risk on” asset class, has dropped, alongside most other riskier assets, including global stock markets.
However, there are reasons, and also historical context, to suggest that due to its underlying core characteristics, should the Israel-Hamas war become protracted, and we hope it doesn’t of course, we could see Bitcoin’s value surge, defying traditional risk-on categorisation.
There are five key attributes that underpin its status as a hedge in times of crisis.
First, Bitcoin operates independently of centralised authorities, providing investors with a financial refuge outside the reach of government control. This quality is especially relevant in regions rife with political turmoil.
Second, Bitcoin’s fixed supply, capped at 21 million coins, offers an intrinsic store of value, impervious to inflationary pressures or devaluation of fiat currencies. During times of war and economic uncertainty, this becomes increasingly attractive.
Third, the crypto is easily transferable and can be accessed with an internet connection. In areas marred by conflict, where conventional banking services may be disrupted, Bitcoin offers a lifeline for financial inclusion and mobility.
Fourth, Bitcoin’s rising popularity has made it a recognized asset class worldwide, garnering the attention of investors and institutions as a potential safe haven during crises.
And fifth, Bitcoin is considered an alternative asset class, offering diversification benefits when traditional investments, such as stocks and bonds, face heightened volatility and uncertainty.
Historical Correlations
Historical instances illustrate Bitcoin’s remarkable resilience and its potential to appreciate during geopolitical unrest.
The Arab Spring uprisings in 2010-2011 resulted in political and economic instability in multiple Middle Eastern countries. Amidst the turmoil, Bitcoin’s value surged.
People in these nations, grappling with financial uncertainty, sought refuge in a digital asset that was detached from their governments’ control. Bitcoin’s price rose from around $1 to over $30 during this period.
The Cyprus financial crisis was another stark reminder of the vulnerabilities in the traditional banking system. During this crisis, fears of bank closures and capital controls drove Cypriots to turn to Bitcoin as a means of protecting their wealth. The Bitcoin price saw a significant surge, reaching over $266.
While Bitcoin’s allure during geopolitical crises is evident, it is essential to acknowledge the risks too, which include price volatility and regulatory uncertainty.
Nigel Green is deVere CEO and Founder
