Moments of geopolitical tensions always make people more aware of their finances to protect against inflation and currency devaluation. In the past, during these periods, people have turned to gold the most, but now, in the age of digitalization, could they be more interested in Bitcoin (BTC), aka the digital gold?
The headlines are full of plenty of geopolitical uncertainty, which is marked by energy shocks and military conflicts. This news is making people fearful and also lowering the confidence of investors. For various years, Bitcoin has been referred to as digital gold, so now it is finally time to prove whether this narrative really applies. If Bitcoin manages to be seen more as a safe haven, then the demand for investing in BTC will also grow. A bigger demand will also make the Bitcoin price surge, and make this asset a great store of value in geopolitical instability, standing alongside gold, government bonds, or commodities like oil.
In this article, we will discover more about Bitcoin, so keep reading to learn more.
Why can Bitcoin be considered a store of value?
In the past, when the world was dealing with geopolitical instability, they had particular assets they placed their attention on, which made them receive the name of store of values. Among these safe havens, we can mention gold, government bonds, the US dollar, or other commodities like oil. These were seen as less risky, which is why they were preferred by investors. However, now there is also another asset that has joined this pack, represented by Bitcoin.
As technology is present more than ever, it is normal to have a store of value that highlights this feature. Other than this, Bitcoin also has the advantage of being a decentralized asset that operates without control from central authorities. So, during geopolitical tension and financial uncertainty, Bitcoin presents a great advantage because of this characteristic.
A look at past examples of how BTC behaved in economic crises
Bitcoin was launched in 2009, which means that it has seen a lot and shown the way it behaves in moments of economic uncertainty. For instance, the idea of Bitcoin was created back in 2008, particularly as a result of the financial crisis. This reality made Satoshi Nakamoto want to launch an alternative that was decentralized, represented by Bitcoin. Then, Bitcoin reached a high peak during COVID-19, which was another moment that made people look for solutions. It was during this time that Bitcoin attracted new adopters and increased the popularity of this asset.
The features that make Bitcoin preferred during moments of global instability
There are some unique features that Bitcoin has over the others, which make it stand out during moments of global instability. Here are some of them.
Borderless solution
Bitcoin is a borderless solution that is universal and not limited to specific geographic locations. Unfortunately, there have been examples where, during moments of political uncertainty, people have lost access to their accounts in fiat currencies. This is why Bitcoin has an advantage over them, and can truly prove to be the winning solution, since it is accessible only with an internet connection, and not with control from central authorities.
Hedge against inflation
Again, as Bitcoin has some unique features, and it doesn’t have the same characteristics as fiat money, this also means that it can escape inflation. During moments of global instability, inflation is high and affects most currencies. Bitcoin is a scarce asset with only 21 million coins that will ever be created, which maintains the scarcity of this coin and makes more people want to invest in it.
Function 24/7
Bitcoin doesn’t function after a program, but it is open and operating 24/7, which means that you will always have access to it. So, no matter the events that are going on in the world, you can still have access to BTC.
Can geopolitical stress actually be an advantage to Bitcoin?
In moments of geopolitical stress, people are panicking as this feeling is triggered by the market and the increase in prices of several assets. For instance, the energy prices are going upwards, while the equity market is starting to be more volatile. In this reality, investors look for assets that will help them escape these realities, and investing in crypto like Bitcoin becomes the solution found by some.
The decentralized nature of Bitcoin is attracting them, so during these moments, it can actually increase its demand. We have several examples where the ultimate solution to unstable economies was to turn to Bitcoin. For instance, after dealing with high inflation and currency devaluation, El Salvador has made Bitcoin a legal tender, and in this way, it managed to escape some of its problems. Nigeria is another country with a high Bitcoin adoption, which came as a result of facing high inflation in the Naira, the local currency. Because their local currency lost value, and the purchasing value has gone down, this made citizens consider more Bitcoin.
Another powerful example is Ukraine, which proves why people turn to Bitcoin when they are in political and economic uncertainty. Because of the war-related pressure, Ukraine is dealing with high inflation. But this has also led to this country having a high crypto adoption.
Conclusion
There have been many examples of people turning to Bitcoin when they dealt with high inflation in the past. This is why Bitcoin has also started to be dubbed as digital gold, and sparked more interest in it. As it is a decentralized asset, Bitcoin can turn to the safe asset team, and be more and more used when the world is dealing with these realities.
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