Right now, there are a lot of nervous cryptocurrencies on the sidelines, waiting for the White House to tell us if we’re in a recession.
But guess what? Saving money does not make money. Recession fears around Bitcoin (BTC -0.90%) are overblown. In fact, Bitcoin is the first thing I buy if we go into a recession because it still seems like the best long-term store of value to me and the best way to protect my financial future.
That said, we’re in uncharted territory here. At the end of the day, no one really knows how Bitcoin will perform during a prolonged recession because the cryptocurrency has never experienced a prolonged recession before. Remember – Bitcoin first came into existence in 2009, in the wake of the previous economic recession of 2007-09. That can explain a lot of FUD (Fear, Uncertainty and Doubt) in the market right now.
Here are three good reasons why I should load up on Bitcoin during a recession.
Bitcoin remains a safe haven for crypto investors
This is simply investing 101: During any economic downturn, move into safe assets. In the stock market, this means shifting to recession-resistant stocks such as utilities, healthcare companies or consumer goods. After all, even if economic activity dries up, your neighbor loses his job, and businesses start going out of business, you can still be sure that companies that take out consumer goods or charge for electricity are going to make money.
Now apply the same logic to the crypto market. People are going to abandon 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 a large part of their crypto holdings en masse to generate money, they are not going to get rid of their Bitcoin holdings. If there’s 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 focus specifically on the US economy, the US Federal Reserve and the full faith and credit of the US Treasury. They’re probably also thinking about US gas prices, employment numbers and economic data. But having a US-centric view when it comes to Bitcoin is myopic.
By design, Bitcoin is a truly global cryptocurrency outside the control of a third-party intermediary. It is as easy for someone in New York City to buy Bitcoin as it is for someone in Nigeria. Therefore, holding Bitcoin is a bet on the fate of the entire global economy, not just the US economy.
Yes, the US may be down for some quarters, but there is a lot of economic activity taking place elsewhere around the world. The only way Bitcoin fails is if the entire globe sinks under the weight of a massive, apocalyptic economic collapse.
BTC was literally formed in the wake of the financial crisis and has shown its staying power for more than a decade. Even during the pandemic, when shops and businesses closed, Bitcoin increased in value. Giving people stimulus checks and then forcing them to stay home all day actually encouraged the formation of a whole new cryptocurrency investment class – the people who said they would 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 outside the control of a single person or organization. Bitcoin founder, the pseudonymous Satoshi Nakamoto, was a special kind of genius in recognizing the problem of letting narrow-minded bureaucrats or politicians control your financial 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.