Bitcoin and the Pandemic: How It Helps the Middle Class

Despite concerns voiced by authorities, many individuals from all walks of life are discovering Bitcoin to be a crucial financial resource.

While figures like European Central Bank President Christine Lagarde point to cryptocurrency as enabling “loopholes” for illicit activities, individuals such as Saeed, an Iranian immigrant residing in France, view cryptocurrency as essential due to the obstacles encountered when utilizing conventional financial institutions.

Prior to 2020, Saeed, who preferred to be identified by his first name only, worked as a software engineer in Iran, earning a salary of approximately €300, significantly impacted by substantial inflation. Starting in 2017, he began providing services to international clients, receiving payment in Bitcoin. By September 2020, he had accumulated enough Bitcoin to pursue graduate studies in France. However, the onset of the pandemic complicated his immigration process.

“After navigating a complex bureaucratic process, I arrived in France last September with only €1,000,” Saeed explained. “HSBC, Banque Nationale de Paris, La Banque Postale – all declined my applications to establish a bank account. It took a month before I finally found a bank willing to work with me.”

During this period, Saeed relied on Bitcoin, demonstrating how the cryptocurrency can benefit those facing limitations within the traditional banking framework.

“Numerous individuals in Iran collaborate with European technology firms,” Saeed stated. “Although I may encounter difficulties purchasing Bitcoin directly from exchanges due to my nationality, it remains a viable option.”

Saeed believes Lagarde’s perspective reflects the interests of banking institutions and governments, rather than those of ordinary citizens who value the ability to transact with him. He anticipates that increased regulation would make accessing the financial system more challenging and costly, potentially requiring him to depend on intermediaries for transactions. However, Iranian migrants represent only one segment of the population utilizing Bitcoin during the pandemic.

In the United Kingdom, a British citizen named Paul found himself stranded in London when flights to his Asian country of residence were canceled. Due to strict financial regulations in his former country and the difficulties of repatriation during ongoing lockdowns, Paul was navigating multiple regulatory environments.

“I had closed my business in Asia shortly before the pandemic began. Following my father’s passing, I found it difficult to continue operating the company,” Paul said. “I spent weeks in hotels and Airbnbs without a permanent address…without Bitcoin, I would have been unable to access funds. My ATM withdrawals were limited to a certain amount per month due to holiday restrictions.”

Fortunately, Paul possessed a small amount of Bitcoin from earlier in the year. While initially unfamiliar with the technical aspects, he quickly adapted. He used Bitcoin to purchase gift cards for essential expenses like groceries, phone bills, hotel stays, and transportation, and also reimbursed a friend in Asia for managing his apartment and storage.

“Looking back, it was likely a risky approach, but I am grateful for Brexit, as it shields us from the potential impact of Lagarde’s policies,” Paul remarked, adding that regulation can be constructive if it avoids imposing restrictions on those without banking access.

Currently, almost a year later, Paul still lacks full access to his financial accounts. Instead, he utilizes Monzo, a banking application that verifies identity using passports rather than residential addresses. He enlists the assistance of friends in London to deposit funds into his Monzo account.

“The process is quite complex. I primarily use cryptocurrency because it is simpler,” Paul explained. “A Nigerian student friend of mine had a similar experience, using Bitcoin to pay his tuition fees… I have now been at my current residence for a few months, which would allow me to open a bank account. However, I no longer see the necessity, particularly given reports of negative interest rates.”

In the meantime, the value of Bitcoin, measured in traditional currencies, has increased significantly over the past six months, providing both Saeed and Paul with additional resources to contemplate their next steps. For Saeed, the question is whether to pursue his graduate program online, acknowledging the reduced networking and practical learning opportunities (the primary reason for his move to France). For Paul, the challenge lies in charting a new career path following the closure of his family business and the disruption of his industry (music marketing).

Purchasing Bitcoin can be viewed as a speculative investment. Indeed, numerous individuals with moderate incomes have accumulated substantial wealth over the past year, often through experimentation with innovative software. However, for individuals like Paul and Saeed, who generally avoid high-risk trading and have limited investment alternatives, Bitcoin’s price appreciation has provided crucial support during a period of challenging job markets and intermittent lockdowns. Benefiting from Bitcoin does not require residing in an authoritarian regime or a country experiencing hyperinflation; I can attest to that personally.

Like many others during the pandemic, my living circumstances changed considerably, initially preventing me from working full-time from home. I was fortunate enough to exchange some poems for cryptocurrency, typically through direct messages and Bitcoin wallets or as digital collectibles in collaboration with technologically proficient artists. Subsequently, the market rally increased those modest earnings sufficiently to cover some of my expenses. A valet worker and student in Kansas named Hess experienced a similar situation.

Quarantine contributed to the end of his six-year relationship, necessitating a relocation. He invested his savings in Bitcoin during the spring of 2020, enabling him to move out by December.

“COVID-19 led to a period of unemployment lasting four months,” Hess said. “Frankly, if I hadn’t decided to allocate approximately 70% of my net worth to Bitcoin, I doubt I would be in as stable a financial and mental state as I am now.”

It is important to note that this is a highly risky financial strategy and should not be considered a primary course of action. Nevertheless, for many individuals facing unforeseen circumstances due to COVID-19, Bitcoin has served as a vital lifeline, as it did for Hess.

Over the past year, Bitcoin donations have gained traction within various American communities, including some groups associated with the events at Capitol Hill. Janet Yellen, the incoming Treasury Secretary, echoed Lagarde’s concerns regarding the potential use of Bitcoin for illicit activities.

However, according to estimates from the analytics firm Chainalysis, such donations currently total approximately $522,000. These figures can be contextualized by comparing them to the cumulative amounts managed by other individuals mentioned in this article. As another legitimate example, Lawrence Douglas, a former operations director at an event security company in California, lost his job as a consequence of the pandemic.

“Cash App fundamentally transformed my financial situation,” Douglas said. “The increase in Bitcoin prices throughout 2020 provided me with considerable flexibility while I actively seek new employment.”

As an unemployed Black man, he statistically faced a lower likelihood of having connections who could provide guidance on investments like stocks or precious metals. He noted that Bitcoin, in contrast, has a “low barrier to entry.” In April 2020, he converted his stimulus check into a small Bitcoin holding. By November, he was employing a dollar-cost averaging strategy, consistently purchasing small amounts of Bitcoin.

Douglas, like Paul, first acquired cryptocurrency during the pandemic. Conversely, when I interviewed over a dozen Bitcoin users across Europe and North America for this article, the majority were experienced cryptocurrency enthusiasts who stated that Bitcoin provided them with “peace of mind” throughout the year-long crisis. Anesthesiologist Quentin Lobb, for instance, said “in essence, our net worth increased substantially in 2020, thanks to Bitcoin. It has offered a welcome and stimulating sense of financial security.”

Another seasoned cryptocurrency user, Brandon Arnold, a Texas real estate agent and broker, said the national political and economic climate was more “stressful than ever before.” In that context, having control over a portion of his own wealth provides a sense of security. The price appreciation is also a factor, although it is not the primary reason Bitcoin is now so appealing to middle-class users.

“If I consider the risk of losing access to my capital, the price volatility becomes less significant,” Paul said. “As long as the price of Bitcoin does not fall to zero, it remains more useful to me than the available alternatives.”