Bitcoin and other cryptocurrencies have been extremely volatile over the past 15 years since being introduced. These digital assets are often touted for their protection against inflation and potential for long-term stability, but the reality is they’ve behaved more like risky assets during periods of market upheaval.
As of April 10, Bitcoin is down about 27 percent from its January 2025 all-time high, compared to about an 18 percent decline for the tech-heavy Nasdaq Composite, as investors digest how tariffs could impact the economy and concerns grow about a possible recession.
Here’s how Bitcoin and other crypto assets might fare in an economic downturn.
Crypto is no safe haven
As investors weigh the possibilities of a recession, many are looking for assets to protect them from the potential storm. But experts say crypto isn’t the place to find it.
“I’m not sure crypto can be considered a safe haven given its volatility,” says Scott Sheridan, CEO of online brokerage firm tastytrade.
Popular cryptocurrencies such as Bitcoin and Ethereum sank more than 70 percent from their all-time highs when investors shunned risk assets following the rise in interest rates in 2022. But crypto eventually recovered, and Bitcoin passed $100,000 as investors cheered a crypto-friendly approach by the Trump administration.
“Bitcoin tends to show a positive correlation with the stock market, so from that point of view, a move in line with other risk assets makes sense,” says Julius de Kempenaer, founder of RRG Research.
The countervailing force here is how the Fed is likely to respond if and when it becomes clear that a recession is underway. The central bank could lower interest rates to help spur the economy on, and that might help put a floor under crypto prices. That factor, however, must fight against the natural tendency of traders to avoid risk in a recessionary environment.
“During times of uncertainty, investors’ risk tolerance and investing habits tend to become more conservative as speculative trading becomes less desirable,” says Dan Raju, CEO of Tradier, a brokerage platform.
And don’t assume that Bitcoin – the bellwether for the crypto industry – will fare the same as other cryptos in a recession. What affects the most popular cryptocurrency may not have any effect on less-followed names.
“The volatility across the universe is so big that it will be hard to apply this assumption to the entire crypto space,” says De Kempenaer.
No reliable way to value cryptocurrencies
In crypto trading, sentiment is an even more potent force than it is in the stock market. That’s because cryptocurrencies have no intrinsic value since they don’t produce anything for their owners. Your return is entirely dependent upon selling it to someone else for a higher price. Legendary investors, including Warren Buffett and the late Charlie Munger have strongly criticized the investment merits of Bitcoin and other cryptocurrencies for this reason.
“Crypto is an investment in nothing,” Munger told the Australian Financial Review in an interview in July 2022. “I don’t want to buy a piece of nothing, even if somebody tells me they can’t make more of it.”
Even those with a more positive view of Bitcoin and crypto assets acknowledge that valuing the digital coins is difficult, if not impossible.
“There is no established way to value Bitcoin,” says Noelle Acheson, former head of market insights at crypto lender Genesis Global Trading. “It’s narrative-driven – narratives can turn on a dime.”
Still, Acheson said she’s very bullish on the long-term prospects for Bitcoin. She sees a growing number of use cases for it and views it as an investment in new technology.
Crypto sentiment is difficult to predict
With the significant decline in crypto assets already, traders may be wondering if the worst is behind us. But it can be difficult to predict what traders will do next.
“The price of Bitcoin is not related to economic fundamentals, but [the] sentiment is,” Acheson says.
Crypto sentiment got a boost when President Donald Trump returned to the White House and promised crypto-friendly policies. Here are some of the comments and moves he’s made so far:
- Launched his own $TRUMP meme coin just before his inauguration, which initially surged but has since fallen 90 percent from its high.
- Signed an executive order that established a crypto working group charged with proposing regulations for the crypto industry.
- Signed an executive order that created a Strategic Bitcoin Reserve as well as the United States Digital Asset Stockpile that can hold other cryptocurrencies.
- “From this day on, America will follow the rule that every Bitcoin knows very well, never sell your Bitcoin,” Trump said in March at a White House event on digital assets. “That’s a little phrase that they have. I don’t know if that’s right or not. Who the hell knows, right?”
There’s no guarantee of a recession
Though fears of a recession have increased following new tariffs introduced by the Trump administration, there’s no guarantee a recession will actually occur. Trump announced a 90-day pause for most tariffs on April 9, which sent stocks and crypto soaring.
If the U.S. can navigate the uncertainty and manage an economic slowdown while avoiding a recession, traders’ sentiment on crypto and risk assets such as stocks may rebound. As risk appetite returns, crypto could be propelled higher.
So some crypto proponents say not to worry too much about the broader macro issues and instead focus on individual cryptocurrencies that could do well.
“Solid digital asset projects with real-economic utility will do well regardless of the macroeconomic environment,” says Dr. Martin Hiesboeck, head of blockchain and crypto research at digital money platform Uphold.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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