The stock market is riding a wave of fear and optimism related to President Donald Trump’s tariff plans. If tariffs cause a recession or worsen inflation, the cards may have further drawbacks in the short term, in the short term.
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But Bitcoin (Cryptography: BTC) It is currently showing very interesting behavior. It may confirm some of the hypotheses of investment papers that were not fully supported by previous evidence. And if that’s actually what it’s doing, that’s another reason why it loads into the coin.
One of the main ideas in favour of purchasing Bitcoin is that it is an asset that is not closely correlated with the traditional financial sector. Given that many major banks currently hold it, it is doubtful whether it is actually true, but the point is that if it is not correlated, it should not go up or down based on what is happening in the stock market or in the global economy. Therefore, it could be an effective hedge against market problems and global turbulence.
In the face of that, the idea may work. Bitcoin is not directly linked to an economic basis, and its value is derived almost exclusively from its inherent rarity and the fact that it has an army of stubborn evangelists who are willing to buy it at virtually any price. However, historical data was unstable, at least until recently.
Over its lifespan, Bitcoin has experienced a dramatic decline in cutting off more than 80% of its value. It took at least a few years on average to recover and power beyond these troughs. No one thinks of the safe assets to hold when time goes wild. However, that paradigm may be changing.
Consider this chart depicting Bitcoin’s performance against Exchange Sales Funds (ETFs) that track major stock market indexes since March 22nd.
Bitcoin price data by YCHARTS
Do you notice anything? All major groups of stocks were being stolen by the news of looming tariffs, but Bitcoin prices actually recovered stronger after a deeper first dip. It did not collapse as it was expected to be speculative assets during the period of peak pessimism. It is one of the key factors that ensure deeper exploration.
For now, consider this next chart, which has seen its first movement since the presidential election.
Bitcoin price data by YCHARTS
Bitcoin continued to acquire value during periods of unrest, beginning after the election and leading to confirmation of the worst market expectations for the trade war in April. But why is it so important in a big scheme of what that means and why coins are worth buying and holding?
The story continues
In short, if Bitcoin holds up when everything else is struggling, that means there is flesh at the bones of the argument that it is an uncorrelated asset compared to the traditional financial system. In other words, it could ultimately indicate its capabilities as a safe asset. Until now, except in an era when its prices were driven upwards primarily by their own supply dynamics, the coin appeared to be highly correlated with a wider market during its decline, such as the 2022 Bare market.
Actual tests of Bitcoin safety are still underway. Markets may soon be coming in a lot of turbulence, especially if tariffs are undermining economic impacts around the world.
In the event of a recession caused by tariffs in the United States or elsewhere, it is inevitable that some holders will need to settle Bitcoin to pay their bills. The question is whether they do as one of the first assets they sell, or as one of the last assets. At this point, we cannot answer that question clearly. Furthermore, it is not possible until more data is produced.
However, it is important to note that even in that bearish scenario, only 21 million Bitcoin will be mined. And the difficulty of mining it only increases over time, and the increasing efforts will result in lower revenues and lower revenues. Therefore, the mechanisms that create the core value of rarity will be crushed in the future, even if prices fall during a tough economy. It is worth buying at today’s current prices to get benefits from the long movement towards a shorter supply.
But imagine whether Bitcoin will pass the general defeat of financial markets while maintaining most of its value, or perhaps continuing to see against its major assets. It is not guaranteed based on previous preliminary performance, but if the trend continues it will confirm its properties as a rather safe investment, creating even more demand for the coin, if any. In these circumstances, it makes sense to buy more than before.
No matter what scenario arises, you can still buy Bitcoin with the confidence you are today. It is provided that you are willing to hold it over the years necessary for the paper to fully unfold in your favor. If you continue to show signs of strength amid this tariff-derived instability, consider setting up a dollar cost averaging strategy to begin building exposure a little more aggressively than before. The longer you resist downward movement, the longer its long-term potential is confirmed.
Consider this before purchasing inventory with Bitcoin.
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Alex Carchidi has a Bitcoin position. Motley Fool has a position and recommends Bitcoin. Motley Fools have a disclosure policy.
Bitcoin is not doing one important thing right now. This is why you should buy it. Originally published by The Motley Fool
