Bitcoin may not be a good investment in a recession due to its high volatility.

From Nasdaq

August 13, 2024 4:41:53 pm:

Fears of a potential recession rise after weak jobs report, leading experts to question if the Fed waited too long to cut interest rates. With bitcoin being touted as an “inflation hedge,” is it still a good investment in the current economic climate?

Bitcoin has rebounded in 2024, but experts warn it may not protect against a recession. Grayscale’s head of research, Zach Pandl, notes that in a recession, bitcoin could see a price drop due to its correlation with stocks. Market timing is advised against, with diversification being a safer strategy.

Bitcoin’s recent drop below $50,000 and subsequent rebound to around $59,000 highlight its high price volatility. Critics point to its lack of intrinsic value and income generation, making it a speculative investment. Some experts warn that bitcoin’s correlation with high-risk assets like tech stocks could make it a bad investment in a recession.

Experts argue that bitcoin behaves more like a “proxy for Big Tech” than a hedge against market volatility. Its reliance on new money and lack of company fundamentals could lead to price fluctuations in the event of a crisis. Bitcoin is viewed as a risky growth stock held by a small group of large investors.

As a speculative asset, bitcoin may not be a good investment during a recession, as investors are more likely to sell for quick cash. Economic downturns could lead to a decrease in demand for speculative assets like bitcoin, potentially driving down its value.

Read more at Nasdaq.: 3 Reasons Bitcoin Could Be a Risky Investment If Recession Is Predicted