Fears about a potential recession are bubbling up once again following a weak jobs report, triggering many experts to argue that the Federal Reserve has waited too long to cut interest rates. Against that backdrop, is bitcoin — an asset which has long been touted as an “inflation hedge” — still a good investment in the current economic landscape?
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While bitcoin and the crypto ecosystem as a whole have bounced back in 2024 from very turbulent times, some experts argue that the asset won’t provide sufficient protection in a recession. For instance, Grayscale head of research Zach Pandl noted that were the U.S. to experience a recession, bitcoin could take a hit, albeit a lesser one than in the past.
“Bitcoin is a risky asset with a positive correlation to stocks, and its price could be expected to fall in a recession — as it did in early 2020 with the onset of the COVID-19 pandemic,” Pandl said.
He added that the best advice for most investors is to buy and hold a diversified portfolio of assets, and to avoid market timing.
As Morning Brew reported, bitcoin dropped 20% earlier this month to below $50,000 by Aug. 5, “its lowest price since February of this year. … The drop coincided with a widespread market meltdown, largely due to fear of a U.S. recession, Japan’s index plunging, and geopolitical instability in the Middle East.”
As of Aug. 19, bitcoin was hovering around $59,000, up 100% in the past year, and down 11% in the past two weeks, per CoinGecko.
Here are three reasons bitcoin could be a bad investment if a recession were to materialize, according to experts.
Its High Volatility and High Correlation to Tech Stocks
Bitcoin’s high volatility makes it prone to significant price swings, which can lead to substantial losses during economic uncertainty such as a recession, some experts argued.
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Unlike traditional assets, bitcoin lacks intrinsic value and does not generate income, making it a speculative investment, said Robert Hodgins, founder of Sand Hill Road Technologies Fund.
In addition, Hodgins noted that bitcoin’s price often…
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