Bitcoin and other cryptocurrencies have exhibited extreme volatility since their inception 15 years ago. While often praised as inflation hedges and long-term stability assets, they’ve behaved more like high-risk investments during market turbulence.
As of April 2025, Bitcoin has declined ~27% from its all-time high in January, compared to an ~18% drop in the Nasdaq Composite. This reflects growing investor concerns about tariffs, economic slowdowns, and potential recessions.
Here’s how crypto assets may perform in an economic downturn.
Crypto Is Not a Safe Haven
Investors seeking recession-proof assets should look elsewhere.
“Crypto’s volatility disqualifies it as a safe haven,” says Scott Sheridan, CEO of tastytrade.
Bitcoin and Ethereum plummeted >70% from their peaks during the 2022 rate hikes but rebounded later, with Bitcoin surpassing $100,000 amid pro-crypto policies under the Trump administration.
“Bitcoin’s correlation with stocks suggests it will move in line with risk assets,” notes Julius de Kempenaer of RRG Research.
The Federal Reserve’s potential rate cuts could cushion crypto prices, but recession-driven risk aversion may outweigh this effect.
👉 Discover how to safeguard your portfolio during downturns
Cryptocurrencies Lack Reliable Valuation Methods
Unlike stocks, cryptocurrencies generate no cash flow or dividends. Their value hinges purely on market demand—a flaw highlighted by Warren Buffett and Charlie Munger.
“Crypto is an investment in nothing,” Munger remarked in 2022.
Even bullish analysts admit valuation challenges.
“Bitcoin is narrative-driven,” says Noelle Acheson, ex-analyst at Genesis Global Trading. “But its long-term utility as technology is promising.”
Sentiment Drives Crypto Markets
Predicting crypto sentiment is notoriously difficult.
Trump’s pro-crypto policies briefly boosted morale, including:
- Launching the $TRUMP meme coin (down 90% from its peak).
- Establishing a federal crypto working group.
- Creating a Strategic Bitcoin Reserve.
Yet, sentiment remains fragile. “Bitcoin’s price hinges on unpredictable narratives,” Acheson adds.
A Recession Isn’t Guaranteed
Despite tariff-induced fears, Trump’s 90-day tariff pause in April 2025 sparked rallies in stocks and crypto. If the U.S. avoids a recession, risk appetite—and crypto prices—could recover.
“Projects with real-world utility will thrive regardless of macro conditions,” says Dr. Martin Hiesboeck of Uphold.
👉 Explore recession-resistant crypto strategies
FAQ
Q: Should I invest in crypto during a recession?
A: Crypto’s high risk and volatility make it unsuitable for conservative investors. Diversify with stable assets first.
Q: How does Bitcoin perform compared to stocks in downturns?
A: Bitcoin often correlates with stocks but can show sharper swings due to lower liquidity.
Q: Can government policies save crypto in a recession?
A: Pro-crypto measures (e.g., rate cuts, regulations) may help, but sentiment and macro trends dominate.
Q: What’s the safest crypto in a recession?
A: No crypto is “safe,” but large-cap assets like Bitcoin and Ethereum have more resilience than speculative altcoins.
Editorial Disclaimer: Conduct independent research before investing. Past performance doesn’t guarantee future results.
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