Foreword
When crisis strikes, whether it’s war, natural disasters, or economic collapse, traditional financial systems often struggle. Cryptocurrency, while still relatively new, has been in the spotlight in these moments. But is it always the hero? Not necessarily.
Let’s explore some real-life examples to see why context matters more than ideology.
When Cryptocurrency Works
Russia-Ukraine War: Cryptocurrency as a Lifeline
In 2022, Russia and Ukraine went to war, and the global financial system was in turmoil. Banks were unavailable, currencies were unstable, and millions of people were in desperate need of financial support. Cryptocurrency stepped in quickly and effectively. Ukraine raised over $100 million in cryptocurrency donations alone, providing rapid aid directly to those in need. Unlike traditional systems, cryptocurrency transfers are instant, transparent, and unaffected by geopolitical blockades. This is certainly a strong case for cryptocurrency as a lifesaver.
However, the same technology could also be used to finance wars. There have been reports that some Russian entities have used cryptocurrency to circumvent international sanctions. Although small in scale compared to traditional finance, this highlights the dual purpose of cryptocurrency technology.
Argentina: Escaping 100% Inflation
Argentina has been battling hyperinflation for decades. In 2023, inflation was over 140%. The local currency, the peso, continues to depreciate, and banks have set limits on foreign currency purchases, making it difficult for people to protect their savings. Many have turned to stablecoins, such as USDT (Tether) and USDC, as an alternative to the digital dollar.
Instead of holding pesos that depreciate monthly, people buy stablecoins through peer-to-peer apps and cryptocurrency exchanges. Some use Bitcoin or Ethereum as a long-term hedge, but stablecoins become the go-to tool for day-to-day inflation protection.
Lebanon Banking Crisis: Alternative Financial Escape
Lebanon has been facing a severe banking crisis since 2019. Banks froze people's life savings, leaving many unable to access their money. Cryptocurrencies offer a way out. Lebanese turned to stablecoins and Bitcoin as a reliable means of storing value and transacting when banks refused service.
Cryptocurrencies became an important tool for financial survival, but accessibility remains a problem. Only those who are technologically savvy and have the resources to acquire cryptocurrencies can benefit from them, highlighting the technology's limitations in broad crisis response.
When Cryptocurrency Falls on the Wrong Side
FTX Collapse: Broken Trust
Crisis is not only war or natural disasters, sometimes it also comes from financial collapse within the cryptocurrency world. At the end of 2022, the collapse of cryptocurrency exchange FTX showed how wealth and trust can disappear overnight. Due to mismanagement and fraud, billions of dollars of assets that investors thought were safe evaporated in an instant.
The disaster revealed a harsh truth: the cryptocurrency world is largely unregulated and extremely risky. While cryptocurrencies offer decentralized freedom, this freedom can lead to devastating losses without proper safeguards.
Venezuela's Economic Collapse: A Double-Edged Sword
Venezuela has experienced one of the worst economic crises in history, with hyperinflation making the local currency almost worthless. Amid the chaos, cryptocurrency has become a savior for many Venezuelans. Citizens turned to Bitcoin and other cryptocurrencies to protect their savings and buy basic goods. It became a parallel financial system that provided millions with a way to survive when government-issued currencies failed.
However, there is another side to the story. Crypto scams and volatile investments have also targeted desperate Venezuelans, who are desperate for a quick financial solution. Ponzi schemes and fraudulent tokens have emerged almost overnight, exploiting people's vulnerability and desperation. Here, cryptocurrencies have shown both the potential for empowerment and the risks of being exploited.
Why context matters
Cryptocurrency is not absolutely good or bad. It is a tool. Like any tool, its effectiveness depends on how, when and where it is used.
In repressive regimes:
Cryptocurrencies provide financial freedom. In countries like Iran or Venezuela, where governments restrict banks and freeze accounts, cryptocurrencies allow people to evade surveillance and store wealth overseas.
Where regulation is lax:
People are also more likely to be scammed. Rug pulling, fake tokens, phishing attacks – these are real risks, especially for new users chasing profits in desperate times.
In developed economies:
Crypto is primarily an investment vehicle, a speculative asset. People buy it hoping the price will go up. But during crises, like recessions, prices tend to fall – just when people need cash the most.
In unstable economies:
Crypto becomes a backup plan. It’s a way to move money when a bank fails or a currency collapses. It’s about not going bankrupt.
What We Learned
A quick summary:
Cryptocurrencies are helpful when:
Money needs to be moved quickly across borders.
Local currencies are collapsing.
Banks are frozen or severely restricted.
Financial privacy and control are needed.
Cryptocurrencies can be harmful when:
Used without understanding the risks.
Leaving funds on centralized platforms.
Chasing hype rather than managing risk in a crisis.
Final Thoughts
In times of crisis, the true value of cryptocurrency emerges - it provides a financial alternative when traditional systems are shaken. But like any powerful tool, its strength depends entirely on how it is used responsibly.
Understanding this balance won't make you a cryptocurrency expert overnight, but it will be enough to know that the next time you hear the topic of cryptocurrency in a crisis, you will see the full picture.
Joy
Alex
Jasper
Hui Xin
Jixu