We discuss Bitcoin as a potential safe haven during an economic crisis. Bitcoin can potentially offer a number of characteristics which counteract the volatility of a financial crisis, including a lack of correlation to traditional markets and a trustless decentralised architecture. Through country-by-country discussion, we highlight advantages and disadvantages of the utilisation of Bitcoin in economically perilous times sparked by inflationary effects on currency, over leveraging on asset classes, political unrest, international trade relationships, and fiscal policy.


The Global Financial Crisis exposed the inherent shortcoming of banks and other financial institutions to the public. This same shortcoming lead to the creation of Bitcoin, a decentralised and open source currency that is not controlled by any one central authority. More broadly, when using Bitcoin you no longer need to trust an intermediary to make a transaction or handle any of your currency for you. On the surface, this seems like a great solution for people who have lost confidence in their financial system, because it allows them to store value in a currency which does not require them to trust any of the central authorities which caused them the problem to begin with. However, a larger question arises — can Bitcoin actually be used as an effective safe haven from a financial crisis?

This is a hotly debated topic in crypto and the financial world and was recently asked in a FundStrat Global survey to institutional investors. The result of the survey was that a resounding 72% of institutional investors believe that the price of crypto would rise during a recession. The main reasons behind that sentiment include:

  • The belief that Bitcoin is distanced and therefore not correlated to traditional markets.
  • Cryptocurrency is fundamentally tied to the concept of not having to trust a centralised authority. In theory, this anti-establishment movement should pickup momentum in a time of economic crisis.
  • The theory that governments and central bank funds will move into the crypto market during an economic crisis to diversify their currency reserves.


There are many advantages of using Bitcoin as a safe haven in an economic crisis, including:

  • It is not controlled by a central authority such as a government or bank. Most economic crises involve the fault of one of these central authorities, which is explored in more detail in the history section below. Bitcoin allows a safe haven for people who have lost trust in their government and banks because they no longer believe in their economic policies.
  • It is widely accessible, as you generally only need internet access to be able to purchase Bitcoin.
  • It can be used as a universal store of value that is easy to transfer ownership in.
  • It has no cross border restrictions (unless the local government makes regulations preventing them, but even then it is incredibly hard to have any control over from a government perspective because of its decentralised nature).
  • It is distanced and historically uncorrelated from traditional markets, meaning it shouldn’t react to the same negative issues that people are generally trying to escape by using Bitcoin as a safe haven.
  • Crypto asset markets never sleep, allowing 24/7 access to investment.


However there are also many disadvantages of using Bitcoin as a safe haven, which makes many sceptical of its value in an economic crisis. These include:

  • The volatility has historically been very high. It is not a particularly good safe haven if the value is constantly rising and falling. This could create even more problems for whoever is trying to use Bitcoin as a safe haven.
  • Bitcoin is largely still viewed as a speculative investment vehicle, which means you shouldn’t invest more than you are willing to lose. This does not align with the thought process of using it as safe haven for people who are trying to shelter themselves from economic uncertainty.
  • In the current landscape it is much easier to move from assets like equities and bonds into safe havens such as gold. This infrastructure is not yet in place for an easy transition to Bitcoin.
  • The liquidity of Bitcoin is lower than other safe haven option such as gold or USD based on bid ask spreads.
  • Transaction costs can be high (cost fluctuates quite regularly) and transactions can also be slow (also fluctuates based on network traffic).


Since Bitcoin’s inception in 2008 there have been 7 significant currency crises which provide useful insights into whether Bitcoin is a safe haven in a financial crisis. These countries include Cyprus, Argentina, Greece, Iran, Turkey, Venezuela, and Zimbabwe.

The Cyprian banking crisis of early 2013 resulted in many citizens becoming concerned and losing trust in the financial state of their nation. This came about as Cyprian Banks over leveraged to local property companies at a time when their international credit rating underwent a downgrade, increasing their cost of borrowing and repayments.

The peak of the Cyprian banking crisis was in April 2013, which coincided perfectly with Bitcoin having a parabolic run and reaching all time highs as shown below. The volume on MtGox, the largest cryptocurrency exchange at the time, also saw volume spike by 2–3 times the levels of previous months.

This event is considered one of the major catalysts for increasing the adoption of Bitcoin as a mainstream currency and investment option. Prior to this Bitcoin was largely used as a digital currency, but the events in Cyprus led to many news outlets reporting Bitcoin as a safe haven from the economic crisis for citizens of Cyprus. This economic crisis helped to shift the perception of the way people looked at Bitcoin around the world.


Argentina are currently fighting a currency crisis, which has had some interesting effects on Bitcoin. Their currency crisis has resulted in the nation having inflation levels approaching 25%, interest rates reaching 60%, and rising debt levels including a $50 billion USD credit line from the IMF. One notable response from an Argentinian instutution amidst the crisis, Argentinian Banco Masventas, was to partner with Bitex, enabling their customers the ability to make cross border payments using Bitcoin. This was a catalyst in leading to Argentinian citizens exchanging their Pesos for Bitcoin as a safe haven from the rapidly depreciating Peso, as illustrated in the chart below.

Recent reports suggest the Central Bank of Argentina are considering Bitcoin as a tool for diversifying part of their currency reserve. The country is now a hotspot for Bitcoin activity because of their currency crisis, which has seen 12 Bitcoin ATMs installed in Buenos Aires as demand for the digital currency continues to rise. More and more Argentinian businesses are beginning to accept Bitcoin as payment and the local price of Bitcoin has risen to a premium as demand increases.


Greece is another nation that has experienced an economic crisis in recent years. While holding a referendum on a potential Eurozone exit, the Greek government attempted to avoid a run on the banks through a week long closure. These actions spurred the Greek population to panic as they realised the very limited control they possessed over their money once it was in the hands of a central authority like the bank.
The concept of Bitcoin as a safe haven became apparent during the economic crisis and many Greeks began to store their value in Bitcoin. The amount of Greek interest in Bitcoin as a safe haven was perhaps best displayed by the increased demand in Bitcoin exchanges at these times. The founder of BTC Greece made a statement that Bitcoin demand had risen 400% at the time. On a larger scale, there was also a Greek impact with the co-founder and CEO of Bitstamp, one of the largest cryptocurrency exchanges in the world, making the tweet below.


Iran appear to be at the beginning of an economic crisis as the Rial continues to decline against the USD. This is due to oil sanctions from the US government which will place large export restrictions on Iranian oil, with the US having a view to completely cease oil trade with the nation.

In reality, the depreciating Rial is an even worse problem for Iranian citizens than it appears. The official government exchange rate is 1 USD to 41250 Iranian Rial, which is price set by Iranian banks. However, in exchange offices and the black market, citizens are getting access to the actual exchange rate as determined by market forces. This exchange is more than 3 times worse, at 1 USD to 130,500 Rial, representing the true extent of their depreciating currency.

Iran’s government need a solution to their global trade problem because of their rapidly depreciating national currency. They see Bitcoin as a potential solution to this problem, which is elaborated in a recent statement:

“[IPCEA has already] obligated the Central Bank of Iran to start developing proposals for the use of cryptocurrency. Over the past year or two, the use of cryptocurrency has become an important issue. This is one of the good ways to bypass the use of the dollar, as well as the replacement of the SWIFT system. They [Russia] share our opinion. We said that if we manage to promote this work, then we will be the first country that use cryptocurrency in the exchange of goods.”

This is incredibly bullish news if it comes to fruition. Bitcoin being used in global trade would increase volume and real world use case of the digital currency significantly, and would pave the way for more countries to follow suit in the future.


Turkey have recently entered a currency and economic crisis which has involved the Lira falling in value due to high inflation. The cause is mostly attributed to very high foreign debt and a large current account deficit, coupled with unorthodox interest rate policies by their President.

This fuelled a spike in Bitcoin activity in Turkey as the population searched for a safe haven from the economic crisis. Koinim, Turkey’s largest cryptocurrency exchange, reported a 63% increase in Bitcoin trading activity. Additionally, a survey has shown that Turkey now has the highest rates of cryptocurrency ownership amongst all European countries, US and Australia as shown in the chart below.


Venezuela have an ongoing economic crisis in their nation including hyperinflation levels of approximately 14000% in June 2018. This currency collapse has had devastating effects on the citizens with an estimated 90% now living in poverty and the average population weight falling by 8.7kg as they struggle with malnutrition and the ability to buy basic needs such as food.

The economic system in Venezuela has fallen apart and this has caused the population to seek alternatives to store their wealth and protect themselves against the depreciating Bolivar. This is well displayed below in the weekly Bitcoin trading volume using the Venezuelan Bolivar.

The Venezuelan government has also turned to using cryptocurrency as a new alternative national currency called the Petro Coin which is designed as a dollar that is backed by oil at a 1:1 ratio. However trust issues still exist around whether the Venezuelan government’s claims of a completely oil backed cryptocurrency are entirely true.

Zimbabwe have also been through an economic crisis involving hyperinflation and shortages of foreign exchange. It is still having significant effects and began due to poor economic practices such as the excessive printing of money by the government, causing huge levels of hyperinflation (peaked at 76.6 Billion % in November 2009). In 2009, the nation stopped printing its own currency and began to use other nations currencies instead, with a view to solely adopt USD as their national currency by 2015. The hyperinflation was caused by a central authority in the form of the Zimbabwean government and has had a significant impact on Bitcoin in the area as citizens have looked for a safe haven.

This is a statement from Yeukai Kusangaya, coordinator of trades on Africa’s main cryptocurrency exchange Golix, “Interest in bitcoin has peaked as people cannot send money outside or pay for international transactions using formal banks,” said Kusangaya. “People have had to look for alternatives and bitcoin has been a useful solution which can be used to purchase goods on Amazon or to pay for vehicles from international suppliers and traders,” she said.

The price of Bitcoin on Golix has often been trading around 2 times the global average, but this is not particularly relevant because volume and liquidity are very low on the exchange, causing liquidity spikes in the price. Most of Zimbabwe’s volume is conducted through a peer to peer exchange called, which is much closer to the global price average.


History suggests that people experiencing an economic crisis have resorted to Bitcoin as a safe haven as they aim to store their value somewhere which is not controlled by a central authority. There has been a common thread amongst these crises, which is the fiat currency of each nation collapsing due to actions of either governments or banks. Even more so, most of these currency collapses stemmed from the actions of the nation itself (with an exception of Iran as the Rial collapse was mostly fuelled by the US government). In each situation, the affected populations moved to Bitcoin as a safe haven as they became increasingly distrustful of how central banks and the government manage the economy.

However, each of the economic crises discussed remain isolated and small in scale compared to a full blown financial crisis like the global financial crisis of 2007–2008. It is still unclear whether Bitcoin would operate as an effective safe haven in such a large global event.

Based on the preceding discussion, Bitcoin tends to be an effective safe haven if there is a currency crisis involved. Trends revealed the main motive to adopt Bitcoin as a safe haven was the need to store wealth. Bitcoin provided a solution which had easy access and did not involve needing to trust a government or bank.

The need for a store of value stemmed from the high inflation rates of their national currency meaning that it was no longer a suitable option for citizens. As for a global event like the global financial crisis, we believe it is too unclear at this stage to determine how Bitcoin will be affected. History shows it will be reliant on how well each country’s currency performs in such an event.

Josh Fellowes,
Head of Investment
BlockSmart Capital

Disclaimer: This article is research based but does not constitute financial advice. At no point has this article prescribed the purchase or sale of any financial product. Please consult with your personal financial adviser before making any investment decisions.