[tomkarlo]

The problem isn't that it's unpopular, it doesn't seem (from the post) like you have some kind of underlying economic or financial principle supporting your argument.

* why would it have an inverse relationship with other assets? It's not a short. It's still valued based on purchase price vs sale price, adjusted for risk. If risk has risen and nothing has changed about purchase or sale price, why would it rise?

* if Bitcoin was at a market-clearing price before a downturn, and other assets are now much cheaper, why would BTC then be comparatively more attractive in terms of expected investment returns?

[craigc]

Well can we at least agree that no one knows with absolute certainty what will happen to Bitcoin and other crypto currencies during the next recession?

The reason I believe it will be inversely related is because it is still a relatively new market whose market cap is minuscule compared to other established markets.

During a recession people will naturally look for other places to put their money and gold will be the obvious choice. Bitcoin has all the same properties as gold except it is cheaper to acquire (fees), cheaper to store, has a fixed mining rate (with gold more supply is created when the price increases which drives the price back down), and has only 1% of gold’s market cap. The way I see it, it would be silly not to at least hedge a small amount of money into BTC/crypto.

The other economics reason is pure supply and demand. The supply of Bitcoin is shrinking every day as more people decide to hold it long term. Many more get lost or stolen. Every couple years the block rewards get cut in half as well.

All of that said, the rise and fall in the last year has definitely shaken the public’s confidence so it may take a long time before new money starts flowing into it. All of my timelines are years down the road. (10-20 years)

[tomkarlo]

Obviously, nobody can predict the future, but the whole point of talking about what's likely to happen is to make reasoned guesses based on the best available data and economic models.

The nature of a hedge, in particular, is that you do it before a market downturn, not after. Once the market has dropped, you want to unwind that hedge, which in the case of gold or Bitcoin means selling. If you look at gold's performance during recessions since we unlinked it from the dollar, it's as likely to decline as rise. That makes it a poor hedge against recession.

In terms of supply and demand, it's true that supply is constrained, but that's only half the equation. Demand is extremely volatile, as there's no inherent "consumption" of crypto currencies (aside from lost wallets and other breakage), not is there any production occuring that requires btc to continue. The demand is entirely composed of people buying it with the expectation of a future sale at a higher price... that's speculative demand, and it's not a stable or dependable type of demand.