Someone asked me, Does war give chance for crypto to rise?
Yes, war or major geopolitical instability could present both risks and opportunities for the rise of cryptocurrencies. Here's how war might influence the chances of crypto rising:
1.Economic Sanctions and Financial Restrictions:
Potential for Rise: In times of war, countries involved in conflict may face economic sanctions that cut them off from the global financial system. This has already been observed in cases like Iran and Russia, where individuals and businesses turned to crypto as a workaround for sanctions. If traditional banking channels are restricted, people may increasingly rely on crypto as a way to move money across borders.
Example: After the Russia-Ukraine conflict escalated in 2022, there was a surge in crypto donations to Ukraine, and Russian individuals also used crypto to bypass restrictions on financial transactions.
2. Distrust in Traditional Currencies:
Potential for Rise: If a war leads to hyperinflation, currency devaluation, or mistrust in government-controlled financial systems, people may turn to decentralized assets like Bitcoin or stablecoins for security. This could drive demand for cryptocurrencies in affected regions or globally.
Example: In countries like Venezuela or Lebanon, where economic instability led to a currency crisis, citizens increasingly turned to Bitcoin as a store of value.
3. Flight to Digital Safe Havens:
Potential for Rise: Just as gold is seen as a traditional "safe haven" asset, some investors now see Bitcoin and other cryptocurrencies as "digital gold." In times of war, investors might shift capital into crypto, betting on its potential to retain or grow in value, especially as faith in fiat currencies wavers.
However, this shift is less certain, as crypto is still much more volatile than gold, and the market's reaction to geopolitical crises is unpredictable.
4. Increased Adoption for Aid and Payments:
Potential for Rise: During conflict, traditional banking infrastructure can be disrupted, making it difficult to send or receive funds. Crypto, being borderless and decentralized, offers an alternative, especially for humanitarian aid, remittances, or fleeing populations needing access to funds.
Example: During the 2022 Ukraine crisis, millions of dollars in crypto donations flowed into the country for relief efforts.
Risks to Consider:
Government Crackdowns: Governments may tighten regulations on cryptocurrencies during times of war to control capital flows and prevent evasion of sanctions, which could limit adoption and affect prices.
Volatility: Crypto markets are notoriously volatile, and war-related uncertainty could exacerbate price swings. While some cryptos might rise, others could crash in response to panic selling or investor fear.
Conclusion:
War could indeed act as a catalyst for crypto's rise, particularly if people and institutions lose confidence in traditional financial systems, or if sanctions and restrictions drive adoption. However, the speculative nature of crypto and potential government regulations make it a risky, though potentially rewarding, asset in such scenarios.
