Sources checked 10 November 2026. This page looks at how a recession, rising interest rates or a squeeze on credit can affect a company that holds bitcoin. It uses past episodes only, from official sources, and makes no forecast about the economy, interest rates or prices. It is education, not investment, tax or legal advice. If anything here conflicts with a linked source, the source wins.
Short answer
A downturn rarely hurts a bitcoin holding through one channel. Prices of risky assets can fall at the same time as sales slow, banks become more cautious and lenders test covenants, so the company may need cash just when selling bitcoin is least attractive. In past stress episodes bitcoin has fallen alongside shares rather than acting as a hedge. The protection is in the policy, not in a view on the economy: a cash reserve sized on bad months, a hard limit on holdings, no borrowing that can force a sale, and written triggers the board agreed in calm times.
How a downturn reaches the holding
| Channel | What can happen | What limits the damage |
|---|---|---|
| Forced selling | Revenue falls or costs rise, the cash reserve runs down, and the company has to sell bitcoin at a low price to pay wages or suppliers. | A cash reserve kept separately from the bitcoin and sized on a bad case, not an average month. |
| Banking and de-risking | A bank reviews the account, delays payments from an exchange or asks for more information about source of funds, often when it is reducing risk across its book. | Clear records of where money came from, a second bank or payment account, and an exchange that pays out to a named company account. |
| Loan covenants | A lender tests leverage or interest cover; a fall in reported value or profit can breach a covenant, or a loan secured on bitcoin can be called. | No borrowing secured on the holding, or borrowing sized so a large fall cannot force a sale. Read the facility terms for crypto clauses. |
| Rate rises | Cash on deposit starts to earn interest again, so holding bitcoin instead of cash has a higher opportunity cost, and floating rate debt costs more. | A policy that names what the holding is for and reviews it on a schedule, rather than reacting to each rate decision. |
| Correlation in stress | Bitcoin and shares fall together, so the holding gives little protection in the very months a company needs it. | Sizing the holding as money the company can leave untouched through a long fall. |
| Currency (UK firms) | Bitcoin is mostly priced in US dollars, so the sterling value moves with both the bitcoin price and the exchange rate. | Planning and reporting in sterling, and knowing which way each move pushes the holding. |
What happened in past episodes
These are past periods only. They show what can happen at the same time; they do not say what will happen next.
March 2020: the dash for cash
When the pandemic hit markets in March 2020, the Financial Stability Board describes an acute phase it calls the dash for cash, when investors sold even normally safe assets to raise cash and dealers struggled to absorb large sales. The Federal Reserve cut its target range by 50 basis points on 4 March and by 100 basis points on 16 March, to 0 to 0.25 percent. The Bank of England cut Bank Rate to 0.25 percent on 11 March and to 0.1 percent on 19 March.
Source: Financial Stability Board: Holistic review of the March market turmoil, including the dash for cash (17 November 2020), Federal Reserve Board: Open market operations: the FOMC target federal funds rate range, changes and levels by date, Bank of England: Official Bank Rate history (database).
In January 2022 IMF researchers reported that the correlation of daily moves between bitcoin and the S&P 500 rose from 0.01 in 2017 to 2019 to 0.36 in 2020 to 2021, and that spillovers between crypto and equity markets tend to increase in episodes of financial market volatility, such as the March 2020 turmoil.
Source: IMF: Blog: crypto prices move more in sync with stocks, posing new risks (11 January 2022).
2022: rate rises and the crypto winter
The Federal Reserve raised its target range seven times in 2022, from 0.25 to 0.50 percent in March to 4.25 to 4.50 percent in December, and twice more in 2023 to 5.25 to 5.50 percent. The Bank of England raised Bank Rate from 0.1 percent in December 2021 to 3.5 percent by December 2022 and 5.25 percent in August 2023.
Source: Federal Reserve Board: Open market operations: the FOMC target federal funds rate range, changes and levels by date, Bank of England: Official Bank Rate history (database).
In July 2022 a Bank of England Deputy Governor said that since the previous November, against a weakening global economy, higher inflation and tighter monetary policy, gold had lost 7 percent of its value, the S&P 500 18 percent and bitcoin 70 percent. The Bank's Financial Stability Report that month said the market capitalisation of cryptoassets had fallen to US$900 billion from a peak of almost US$3 trillion in late 2021, and that the falls exposed liquidity mismatches, run dynamics, fire sales and leveraged positions being unwound.
Source: Bank of England: Some lessons from the crypto winter, speech by Sir Jon Cunliffe (12 July 2022), Bank of England: Financial Stability Report, July 2022 (PDF).
Several crypto lenders failed in 2022, freezing customer assets; see bitcoin yield for a company for what regulators and courts found.
Our judgement, not a rule: in both episodes the holding fell in value at the same time as wider financial stress. A company should plan for that combination, not for bitcoin moving the other way.
The cash reserve and runway
The runway is how many months the company can pay its costs from cash without selling anything. In a downturn both sides move: income can fall and costs, including interest, can rise. Work the reserve out on a bad case, then keep the bitcoin outside it.
- Use monthly costs from a bad month, plus known one off payments such as tax, loan repayments and annual renewals.
- Assume the bitcoin cannot be sold for the whole period without loss. If the plan only works by selling it, the holding is too large.
- Check how fast cash actually arrives: an exchange withdrawal, a bank review or a weekend can delay it.
The sizing method starts from this protected cash and only then looks at what could be held in bitcoin. See also bitcoin versus cash for the operating reserve, and replay past periods with the staged buying history tool, which checks whether a cash reserve would have covered a stress.
Stress test questions for the board
- If revenue fell by a third for six months, how many months of runway would the cash reserve give, without touching the bitcoin?
- If the bitcoin holding fell by 80 percent and stayed there for two years, would the company still meet its obligations, and how would the accounts and any covenants look?
- Do any loan, overdraft or lease terms mention cryptoassets, fair value, net assets or interest cover in a way a fall could breach?
- If our bank paused payments from exchanges for a month, how would we pay suppliers and staff?
- Who decides to pause buying or to sell, under which written trigger, and with which two of three approvers?
- For a UK company: what happens to the sterling value if the dollar price and the pound both move against us?
Our judgement, not a rule: the figures above are test cases, not forecasts. Pick ones that would hurt.
Policy triggers to write down
| Trigger | Action the policy could set | Where it lives |
|---|---|---|
| Cash reserve below the agreed months of costs | Stop all bitcoin buying until the reserve is restored. | Section 3, protected reserves, in the policy generator |
| Holding above the hard limit after a price rise | Rebalance back within the band at the next review, approved by 2 of 3. | Section 4, allocation limits, and section 5, approvals |
| Bank or exchange restricts the account | Pause scheduled buying and review counterparties before resuming. | Section 13, scheduled buying, pause conditions |
| A covenant test is close | Report to the board and take advice before any sale or new borrowing. | Section 9, review, and section 2, authority |
| Rates or the business plan change | Review the purpose and size of the holding on the normal schedule, not by reacting to each decision. | Section 9, review |
The policy generator drafts these sections, including the optional scheduled buying section with its pause conditions, and the policy health check shows which ones a draft covers. Keep holdings in a 2 of 3 multisig or with a regulated custodian, so no single person can sell in a panic.
Choose your country for the points that differ.
UK points
- Currency. A UK company converts its bitcoin values to sterling for tax and accounts, as HMRC explains. Because bitcoin is mostly quoted in US dollars, a fall in the dollar price and a rise in the pound both reduce the sterling value; the opposite moves increase it.
- Stress in sterling markets. In September 2022 the Bank of England said long dated gilt prices were repricing sharply and that continued dysfunction would be a material risk to UK financial stability, and it began temporary purchases of long dated gilts from 28 September. Episodes like this can tighten credit for small firms whatever happens to bitcoin.
- Rates. Bank Rate moves change what cash earns and what floating rate borrowing costs; the history is in the Bank's database.
- Banking. See company banking and source of funds for the records that help when a bank asks.
Source: HMRC: CRYPTO40100: Conversion to sterling and accountancy, Bank of England: Bank of England announces gilt market operation (28 September 2022), Bank of England: Official Bank Rate history (database).
US points
- Accounts. Under ASU 2023-08, crypto assets in scope are measured at fair value with changes in net income, so a fall shows in profit for the period. That can matter for lender tests based on earnings or net worth. See US company bitcoin accounting.
- Rates. The Federal Reserve publishes every change in its target range; floating rate loans and lines of credit usually follow it.
- Borrowing. See borrowing against bitcoin for margin calls and liquidation terms.
Source: FASB: ASU 2023-08, Intangibles: Goodwill and Other, Crypto Assets (Subtopic 350-60) (PDF), Federal Reserve Board: Open market operations: the FOMC target federal funds rate range, changes and levels by date.
Common questions
Is bitcoin a hedge against a recession?
In the two episodes above it fell alongside shares, and IMF researchers found it moved more with stocks after 2020. Past periods do not predict future ones, so a policy should not rely on it behaving as a hedge.
Should a company sell before a recession?
This page does not say, and no one can time one reliably. The policy should set limits and triggers in advance, so decisions in a downturn follow rules rather than headlines.
Do higher rates matter if we do not borrow?
Yes, because cash on deposit earns more, which changes the cost of holding bitcoin instead, and customers and suppliers who borrow may pay later.
Common mistakes
- Counting the bitcoin as part of the cash reserve.
- Sizing the reserve on an average month rather than a bad one.
- Borrowing against the holding without modelling a large fall.
- Writing triggers after the stress has started.
- For UK firms, forgetting that the exchange rate moves the sterling value too.
Read next
- Sizing method, protected cash first.
- Policy generator, limits, triggers and pause conditions.
- Staged buying history, replay past periods, worst first.
- Bitcoin versus cash for the reserve, what each is for.
- Borrowing against bitcoin, margin calls and liquidation.
- Company banking, source of funds records.
Sources
Primary sources only. Each link was checked on 10 November 2026. Rules change, so confirm the current version with your adviser.
- Financial Stability BoardHolistic review of the March market turmoil, including the dash for cash (17 November 2020)
- Federal Reserve BoardOpen market operations: the FOMC target federal funds rate range, changes and levels by date
- Bank of EnglandOfficial Bank Rate history (database)
- IMFBlog: crypto prices move more in sync with stocks, posing new risks (11 January 2022)
- Bank of EnglandSome lessons from the crypto winter, speech by Sir Jon Cunliffe (12 July 2022)
- Bank of EnglandFinancial Stability Report, July 2022 (PDF)
- HMRCCRYPTO40100: Conversion to sterling and accountancy
- Bank of EnglandBank of England announces gilt market operation (28 September 2022)
- FASBASU 2023-08, Intangibles: Goodwill and Other, Crypto Assets (Subtopic 350-60) (PDF)
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This is general information and education only. It is not financial, investment, tax, accounting, legal or regulatory advice, and it is not a recommendation to buy, sell or hold bitcoin or any other asset. It does not take account of your circumstances or those of your company. You must obtain your own official professional advice to confirm this information is correct before acting on it.
Rules change. This information is correct to our understanding at the last-reviewed date, but it may be incomplete or out of date, and official sources take precedence. Bitcoin is volatile. A company that buys it could lose some or all of the money it puts in.
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