Bitcoin and other cryptocurrencies have been extremely volatile

Bitcoin and other cryptocurrencies have been extremely volatile over the past 15 years since being introduced. These digital assets are often touted

Crypto assets such as Bitcoin and other digital coins have been known for their volatility, especially during periods of market upheaval.

As investors process the implications of tariffs on the economy and anticipate a potential recession, crypto assets are also facing volatility in 2025.

As of April 10, Bitcoin had declined about 27 percent from its January 2025 all-time high, compared to about an 18 percent decline for the tech-heavy Nasdaq Composite.

Here’s how Bitcoin and other crypto assets might fare in an economic downturn.

Crypto is no safe haven

As investors consider the possibilities of a recession, many are seeking assets to protect them from the potential storm. However, 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 plummeted over 70 percent from their all-time highs when investors shied away from risk assets following the rise in interest rates in 2022. But crypto eventually recovered, and Bitcoin crossed the $100,000 mark as investors welcomed 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 step 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 reduce interest rates to help stimulate the economy, which might help put a floor under crypto prices. That factor, however, would need to combat 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 brokerage platform Tradier.

And don’t assume that Bitcoin – the bellwether for the crypto industry – will perform the same as other cryptos in a recession. What affects the most popular cryptocurrency may not have any impact on less-followed names.

“The volatility across the universe is so vast that it will be difficult 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. This is 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 at 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 challenging, 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 shift 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 substantial 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:

There’s no guarantee of a recession

Although fears of a recession have increased following new tariffs introduced by the Trump administration, there’s no certainty that a recession will actually occur. Trump announced a 90-day deferment for most tariffs on April 9, which caused stocks and crypto to surge.

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 fare well regardless of the macroeconomic environment,” says Dr. Martin Hiesboeck, head of blockchain

News data source: kdj.com

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