Right now, there’s a lot of nervous crypto money on the sidelines, waiting for the White House to tell us whether we are in a recession.
But guess what? Scared money don’t make money. Recession fears surrounding Bitcoin (BTC -1.64%) are overblown. In fact, Bitcoin is the first thing I’m buying if we enter a recession because it still seems like the best long-term store of value to me and the single best way to protect my financial future.
That being said, we’re in uncharted territory here. At the end of the day, nobody really knows how Bitcoin will perform during a long-lasting recession because the cryptocurrency has never experienced a long-lasting recession before. Remember — Bitcoin only came into existence in 2009, in the aftermath of the previous economic recession of 2007-09. That might explain a lot of the FUD (Fear, Uncertainty and Doubt) in the marketplace right now.
Here are three good reasons why I’m going to load up on Bitcoin during a recession.
Bitcoin remains a safe haven for crypto investors
This is simply Investment 101: During any economic downturn, you move into safe-haven assets. In the stock market, it means shifting into recession-resistant stocks like utilities, healthcare companies, or consumer staples. After all, even if economic activity dries up, your neighbor loses their job, and companies start going bankrupt, you can still be assured that companies churning out consumer staples or charging you for electricity are going to make money.
Now apply this same logic to the crypto market. People are going to exit risky, volatile cryptos in favor of crypto names they recognize. And right now, Bitcoin is the biggest, most trusted name out there. Even if people sell off a big chunk of their crypto holdings en masse to generate cash, they aren’t going to get rid of their Bitcoin holdings. If there is one crypto that people “HODL” — crypto lingo for “hold” — for the long term, it’s Bitcoin.
BTC is massively diversified on a global basis
When people talk about an economic recession, they are primarily talking about one in the US and are specifically focusing on the US economy, the US Federal Reserve, and the full faith and credit of the US Treasury. They are probably also thinking about US gas prices, employment figures, and economic data. But taking a US-centric view when it comes to Bitcoin is myopic.
By design, Bitcoin is a truly global cryptocurrency outside the control of any third-party intermediary. It is just as easy for someone in New York City to buy Bitcoin as it is for someone in Nigeria. Therefore, holding Bitcoin is a wager on the fate of the entire global economy, not just the US economy.
Yes, the US might be down for a few quarters, but there’s plenty of economic activity taking place elsewhere around the globe. The only way Bitcoin fails is if the entire globe sinks under the weight of a massive, apocalyptic economic collapse.
Future staying power?
BTC was literally formed in the aftermath of the financial crisis and has shown its staying power for more than a decade. Even during the pandemic, when stores and businesses shut down, Bitcoin increased in value. Giving people stimulus checks and then forcing them to stay home all day actually encouraged the formation of an entirely new cryptocurrency investing class — the people who said they’d never go back to their old jobs because they could make more money and have more free time by investing in crypto.
What makes Bitcoin so unique is that it is decentralized and largely out of the control of any one individual or organization. Bitcoin founder, the pseudonymous Satoshi Nakamoto, was a special type of genius in recognizing the problem of letting narrow-minded bureaucrats or politicians control your economic destiny. That gives me a lot of confidence that Bitcoin will hold its value during a recession. Right now, I’m loading up on BTC and holding on for dear life.