Wait, Wasn't Bitcoin Supposed to Be Good in a Crisis?

The coronavirus pandemic is testing one of Bitcoin's most popular narratives: that in a global crisis, the unwashed masses with their worthless dollars will grovel before the fleece vest-wearing, cryptocurrency-wielding elite. Ha-ha!
March 13, 2020, 7:14pm
Bitcoin Price is Plunging During the Coronavirus Pandemic
Image: Victoria Gnatiuk via Getty Images

Bitcoin was born out of a financial crisis, its debut announced in early 2009 with a block of data containing a headline referencing bank bailouts. Since then, a popular narrative around the technology has been that it's a hedge against the rest of the world—when the Black Swan finally rears its ugly head, the unwashed masses with their worthless dollars will grovel before the fleece vest-wearing, cryptocurrency-wielding elite. Ha-ha!


Anyway, none of that shit has happened during the first real, global test of this theory: the ongoing coronavirus pandemic.

As the US stock market saw its worst crash since 1987, Bitcoin price has taken a serious tumble, actually, and currently sits at roughly $5,500 USD, down from around $9,000 a week ago, and with a 24-hour low of $3,867. Anybody who was hoping to sell any recently-acquired bitcoins for a profit in the near-term is probably sweating bullets right now, and everyone should say a little prayer for folks who bought in mid-plunge, believing with their genius brains that it had definitely reached the bottom.

So, what's happening here? Maybe Bitcoin isn't the "safe haven" asset (like gold) that some thought it was? This has led to a lot of crowing from critics, but many Bitcoiners are ideologically-driven and devoted to the project, which may ultimately be its saving grace during the current dip.

On Twitter, Bitcoiner Pierre Rochard went as far as saying that Bitcoin has proved itself to be the "ultimate safe haven asset" because "the network stays up, the exchanges trade 24/7, and the market found a healthy clearing price above—well above the 2015 low." While it's, uh, let's just call it an overstatement, to say Bitcoin is the "ultimate" safe haven asset while it's actively crashing, Rochard has a point: Bitcoin isn't doing that badly, at least for now. It might not be an unflagging stalwart amid global chaos, but it has seen worse.

Between late 2017 and 2018, Bitcoin crashed from nearly $20,000 to below $4,000 after a wild speculative bubble popped, and it's still here. Maybe external factors such as the coronavirus will end up doing more to damage it than its own hype did—debts must be paid in dollars, after all—but Bitcoin keeps proving that we shouldn't underestimate the willingness of rich nerds with an apocalypse fetish to pour money into this thing over the long haul.

Jill Carlson, a principal at Slow Ventures, made another great point over at Coindesk: Perception is everything, and if Bitcoin isn't seen as a safe haven by the majority then it won't be. Still, she suggests this perception is wrong, and that Bitcoin is in many ways an ideal safe haven. She writes: "It can be self-custodied, so even when systems of trust and rule of law breaks down, it can be held. It is open and borderless, with relatively liquid markets in every country in the world. It is censorship-resistant, meaning no government nor institution can, practically speaking, prevent investment or transaction in bitcoin. Bitcoin has a fixed supply, much like gold."

All fair points, but in practice we are seeing that Bitcoin is not living up to its promise of being a tower from which the moneyed and prepared can laugh at everyone else below. It is simply freaking out.

I own no bitcoins (go on, roast me), but for years I've found it fascinating as an economic and technological site of ideological contest. There's just not a whole lot of things out there so directly predicated on everything else going to shit. That being said, this aspect of Bitcoin's narrative is extremely powerful and is probably going to continue to appeal to the types of people who might buy a luxury emergency bunker or just keep a well-stocked bug-out bag in their closet.

I don't know if this is a good thing, but it's real, and it's why even a crash seems like an opportunity to buy more bitcoins to some. In fact, most of these people are probably already looking ahead to the next big technical event in Bitcoin, the "halvening" in May. Now there's another rabbithole to go down.