While fears of a recession have scaled back in recent days, experts are split as to where the U.S. economy might be going. In parallel, the debate around whether bitcoin and other cryptocurrencies are good hedges during a recession is bubbling up once again, as the space has been enjoying institutional adoption and has gained mainstream legitimacy lately — largely due to spot bitcoin andethereum exchangetraded-funds being approved by the Securities and Exchange Commission this year.
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Bitcoin has long been touted as an inflation hedge, akin to gold. What’s more, the crypto ecosystem as a whole has bounced back this year, yet experts are split as to whether cryptos can truly be recession hedges.
Good Hedge Thanks to Its Scarcity
While some experts argue that they always see bitcoin and crypto as a hedge, they also concede that these assets take a beating when there’s a downturn in the market — just as happened earlier this month. As Morning Brew reported, between Aug. 3 and Aug. 5, bitcoin dropped 20%, to below $50,000 — its lowest price since February.
According to Phillip Shoemaker, executive director, Identity.com, the U.S. government is going to continue to print money, and as bitcoin is a scarce asset, it will serve as a very good hedge in such an environment.
“If you hold dollars and bitcoin during a recession, one of those is going to go massively up once the recession is over — and that will not be the dollar,” he added.
Rob Chang, CEO, Gryphon Digital Mining, agreed with this premise, saying that as bitcoin is underpinned by a decentralized network, it is shielded from the vulnerabilities that typically affect fiat currencies and stock markets during economic downturns.
In addition, he said that the asset, with its fixed limit of 21 million coins, coupled with increasing global acceptance, insulates it from the economic pressures that weigh on more centralized financial systems.
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Good Hedge With Lower Rates
Another point experts made is that if the U.S. were to enter a recession, the Federal Reserve would “dramatically lower interest rates.”
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