Over the past few months, the fears of an impending recession have gone mainstream. While analysts on CNBC and other outlets used to sing the praises of the stock market run throughout 2018, the cheery backdrop has started to fade.
Traditional recession indicators have started to flash: the U.S. Treasury curve for the two-year and 10-year bonds has inverted, which last occurred in 2007; gold has started to rally as stocks have started to top out; global PMI readings have started to fall below 50, implying a recession; among many other indicators.
What’s harrowing is that this comes as many regions of the world have devolved into chaos — the U.S.-China trade war, Hong Kong protests, hyperinflation in Venezuela, an economic collapse in Argentina, and Brexit being the best examples of this harrowing trend.
While recessions impact almost every asset and industry, there are proven safe havens — gold, silver, and the Swiss Franc come to mind. But interestingly, cryptocurrencies have started to get clumped into the safe-haven asset class. A recent survey confirmed this.
40% of Millennials Would Want Crypto In a Recession
A recent eToro survey conducted in July has shown that the “crypto is a safe haven” narrative has actually been memed into reality.
According to survey results shared with the trade publication, 40% of the millennials it polled would invest in “crypto” if a recession was to occur, compared to, say, stocks, bonds, or real estate. Older generations involved in the survey, namely Generation X, didn’t express the same sentiment.
While the lack of older folk acknowledging this narrative may put Bitcoin bulls off, as Adamant Capital’s Tuur Demeester recently pointed out, by late next decade (not a long time from a macro perspective), millennials are likely to have the largest share of disposable income in the world.
With millennials and their younger counterparts clearly turning towards Bitcoin due to their knowledge of digital technologies, this long-term shift is likely to be extremely positive for cryptocurrencies, even in a recession.
2029 is the year where Millennials (biggest adopters of bitcoin) are expected to have the largest share of disposable income, leaving behind Gen X'ers and Baby Boomers. The oldest Millennials will then be in their late 40s and will start to control management of large funds. https://t.co/or0fHUtZNK
— Tuur Demeester (@TuurDemeester) September 6, 2019
Bitcoin, the Next Go-To Safe Haven?
While eToro made good use of the term “crypto” in their survey results, by that, they likely mean Bitcoin. You see, Bitcoin, hands down, is the most anti-fragile cryptocurrency, sporting decentralization, security, un-censorable payments, cheap payments, speed, and scarcity that cannot be had with other digital assets.
These characteristics have led many to dub it “gold 2.0” or “digital gold”, especially due to its ability to improve on what gold does.
But why, exactly, will Bitcoin outperform in a recession?
Well, to put it simply, recessions lead central banks to boost liquidity into the economy, which would push up the amount of capital entering Bitcoin. As reported by Blockonomi previously, a chief reporter at the Financial Times, Henny Sender, stated that central banks are driving up the price of Bitcoin by effectively devaluing their currencies.
With interest rate cuts and quantitative easing — which dramatically boost the amount of money in the economy — expected to become central banks’ go-to solutions to a recession, a scarce asset like BTC is likely to outperform.
It goes deeper than that. Raoul Pal, a former executive at Goldman Sachs, has stated that should fiat money start to collapse in financial depression, Bitcoin is the asset to invest in, as it is an “option on the future financial system”.
He has also explained that in normal recessions, Bitcoin, bonds, U.S. dollars, and diamonds are among the leading assets to purchase to mitigate potential capital loss.