Given the uncertainty around tariffs, some investors are beginning to see Bitcoin as a digital gold and valuable store.
Institutional adoption of Bitcoin has increased, mainly thanks to the launch of the new spot Bitcoin ETF.
If current trade tensions intensify, Bitcoin can challenge the US dollar as the global reserve currency.
As President Donald Trump’s trade war expanded, crypto prices collapsed. Overall, crypto prices are falling annually, with many showing little signs of recovery soon.
Against the backdrop of escalating tariffs, investors are moving from dangerous assets to less risky assets, making them easy candidates to drop cryptocurrencies from their portfolios. But there’s still one cryptocurrency that could win, and that’s Bitcoin (Cryptography: BTC).
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Over the past 30 days, Bitcoin has increased by 14%, primarily due to the revival of digital gold investment papers. In the eyes of many investors, Bitcoin is beginning to behave like physical gold, which makes it extremely valuable. In an age of economic and geopolitical uncertainty, Bitcoin could become a potential repository of value.
While there is still skepticism about this digital gold paper, there is growing evidence suggesting that Bitcoin is superior to gold at the peak of economic and geopolitical uncertainty.
Last September, BlackRock published a 10-page report entitled “Bitcoin as a unique diversification device.” This examined six different external shocks to the global economy that occurred between 2020 and 2024.
In five of the six cases, Bitcoin performed better than gold over long distances. And in half of the cases, Bitcoin performed better than gold in both the short and long term. So, we are confident that Bitcoin can still be the winner, even if the trade war escalates further. Once investors get to grasp the outcome of tariffs, they could rely on Bitcoin as a valuable repository. It can explain why Bitcoin has started gatherings in the last 30 days.
The second major factor is the ramp-up in the institutional adoption of Bitcoin over the past 18 months. This is largely thanks to the launch of Spot Bitcoin Exchange-Traded Funds (ETFS) last year. They’ve now earned over $100 billion from investors looking for an easy way to get into Bitcoin.
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Perhaps these Bitcoin ETFs, which began trading in January 2024, were the most successful new product launches from Wall Street in decades. And they attract investors of all kinds. The first was a hedge fund. Then came the Big Wall Street investment bank. And then came the first wave of large institutional investors such as pension funds. Next could be a large sovereign wealth fund.
At the same time, another form of institutional adoption is coming from within the US government. Trump has campaigned on the Procrypt platform and has already taken several steps to advance Bitcoin adoption within the US. The central move was the creation of a strategic Bitcoin Reserve in March, officially designating Bitcoin as a national strategic asset.
The current uncertainty about tariffs has led many smart people on Wall Street to talk about the potential end of the US dollar as the world’s reserve currency. The dollar is currently trading at a three-year low, with US stocks falling significantly, and long-term Treasury yields are rising. When combined, this begins to paint an image of investors breaking out of dollar-controlled assets.
Image source: Getty Images.
The flashy term for this is “deco-optional,” which refers to a world in which the US dollar ultimately loses its reserve currency status. With that in mind, one currency currently being spoken as a potential alternative to the US dollar is Bitcoin. It is global, non-saubrine and not tied to any particular economic property of any country.
Certainly, this scenario is probably a long way to go, but it suggests Bitcoin’s long-term stay capabilities and its increasing importance for the global financial system. It also suggests that even the worst meltdown in the global economy could still be Bitcoin’s winner.
As BlackRock pointed out in a report last year, Bitcoin has a very unique risk reward profile. In some ways, it acts as an “risk” asset. It also otherwise acts as a “risk-off” asset.
Currently, given all the economic uncertainties, I am not focusing much on Bitcoin’s “risk-again” property, but on its “risk-off” property. The trade war may have crushed the code, but it cannot crush Bitcoin.
Consider this before purchasing inventory with Bitcoin.
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Dominic Basulto has a position in Bitcoin. Motley Fool has a position and recommends Bitcoin. Motley Fools have a disclosure policy.
Trade Wars Cryptoms: 1 Cryptocurrency that could still win was originally issued by The Motley Fool
