Should You Buy Crypto or Stocks During a US Recession?

Recessions in the United States have historically been turbulent times for investors. Economic downturns often bring falling asset prices, rising fear, and difficult choices about where to invest. In this crypto vs. stocks explainer, we compare the performance of both asset classes in past U.S. recessions, including the COVID crash and the 2022 slump. We will look at correlations, highlight where crypto outperformed or lagged, and break down the risks of investing in both asset classes. Here’s what to know.

Crypto vs. stocks in a nutshell

Stock market performance in past recessions

Historically, the S&P 500 has dropped significantly during major U.S. downturns. Here’s an example of how it performed during some key periods:

Major stock market crises since the 1970s

• 1973–1975 (Oil crisis and stagflation): The S&P 500 fell roughly 48% from January 1973 to late 1974 amid high inflation, an oil embargo, and economic stagnation. Stocks eventually began recovering as inflation eased and monetary policy tightened.
• 2000–2002 (Dot-com crash): A speculative bubble in tech stocks burst, leading to a recession in 2001. The S&P 500 dropped about 49% from its 2000 peak to its 2002 trough. The Nasdaq Composite lost even more, with many overvalued internet stocks collapsing completely.
• 2007–2009 (Great Recession): Triggered by a housing market collapse and widespread financial failures, the S&P 500 plunged approximately 57% from late 2007 to March 2009. This was one of the most severe crashes in modern history. While government interventions helped stabilize markets, the recovery took years.
• Early 2020 (COVID-19 pandemic): The S&P 500 fell about 34% in just over a month as lockdowns and panic gripped the global economy. However, this downturn proved brief. Stimulus measures and rapid policy responses fueled a fast rebound, with markets reaching new highs by the end of the year.

The inevitable bounce-back

Despite these steep declines, the encouraging reality is that equities have eventually bounced back from every past U.S. recession. History shows that the S&P 500 and Nasdaq have always recovered to their pre-recession levels (and beyond) given enough time​.

Investors who held a diversified stock portfolio through those recessions were ultimately rewarded when the economy healed.

Crypto and stock market correlation in recent downturns

Cryptocurrencies like Bitcoin did not exist in earlier recessions, but recent downturns have shown how they react during broad market stress. One pattern has been clear through much of the first half of this decade: crypto moves in sync with stocks during risk-off periods. This undermines the once-popular idea of Bitcoin as an uncorrelated “safe haven.”

(Although, as of April 2025, there are some murmurs about Bitcoin showing early signs of decoupling from the stock market — more on that later).

Before 2020: Little correlation with stocks

From 2017 to 2019, Bitcoin’s daily price moves were largely independent of the S&P 500. The correlation coefficient between them hovered near zero (~0.01), and Bitcoin was often described as “digital gold” — a potential hedge during stock market turmoil.

COVID crash: Correlation spikes sharply

That narrative shifted during the March 2020 COVID-19 crash. Bitcoin plunged alongside equities as investors fled risky assets across the board.

As a result, Bitcoin’s correlation with the S&P 500 jumped to 0.5–0.6, compared to near-zero levels pre-crisis. At the peak of the sell-off, the correlation briefly reached 0.6, which indicated that Bitcoin and stocks were moving almost in lockstep.

Post-COVID: Crypto behaves like tech stocks

The correlation trend continued. In 2021, both stocks and crypto surged on the back of loose monetary policy and investor optimism.

However, as inflation rose and the Federal Reserve began aggressively hiking rates in late 2021 and into 2022, both markets reversed course. Bitcoin and tech stocks were hit hard in parallel, with correlations at times exceeding 0.7 (which is extremely high by historical standards).

In the post-COVID market, Bitcoin has more or less behaved like a high-volatility tech stock than a defensive asset.

That said, there might be a twist — or so it seems based on recent developments.

Early signs of crypto decoupling

If you’ve been hoping crypto would break away from stocks, early April 2025 offered a small but promising sign of that shift.

Analysts now point to ETF inflows, on-chain accumulation by long-term holders, and cold storage trends as structural supports for Bitcoin’s price. And chances are institutional players are increasingly treating Bitcoin as a macro hedge — something to hold during volatility rather than dump with the rest of the market.

Some researchers even trace this trend back to 2018, when studies first suggested that crypto markets behaved differently from forex or equities.

If the trend holds, you could be looking at a major step forward for Bitcoin: not just as a high-risk tech bet but as a maturing, standalone financial asset.

When crypto outperforms stocks (and vice versa)

Cryptocurrency is a relatively new asset class, but recent downturns and recoveries provide a window into how it compares to traditional markets, such as equities.

In some cycles, crypto has delivered massive gains relative to equities. In others, it has suffered far steeper losses.

2018: Crypto slumps alone

Crypto can also crash even when stocks don’t. In 2018, the U.S. economy was growing, and the S&P 500 finished roughly flat. Bitcoin, however, plunged over 70% as its post-2017 bubble burst. That downturn was driven by crypto’s internal cycle — not the broader economy.

2020: Shared crash, but crypto roars back

During the March 2020 COVID panic, Bitcoin and stocks crashed together— Bitcoin dropped nearly 50% in days, mirroring the S&P 500’s rapid decline. But the rebound was more dramatic for crypto. This was one instance when the crypto vs. stocks standoff came decisively in favor of the former.

2022: Stocks fall, but crypto crashes harder

In 2022, rising inflation and aggressive rate hikes triggered a broad sell-off. The S&P 500 fell about 18%, but Bitcoin lost over 60%, with smaller coins hit even harder. Beyond macro pressure, crypto faced its own crisis: exchange failures, stablecoin implosions, and shaken trust.

Stocks outperformed simply by losing less. For a balanced investor, equities preserved far more value than a crypto-heavy portfolio.

2023: Crypto rebounds faster

As inflation cooled in 2023 and the Fed paused rate hikes, markets recovered. Stocks regained ground — S&P 500 climbed around 20–25%. Bitcoin, meanwhile, bounced more than 140% off its lows.

Based on these trends, it appears that crypto tends to move with greater intensity than stocks — both on the way down and on the way up.

In liquidity-driven rebounds like 2020 and 2023, it has outpaced equities. In tightening cycles like 2022, it has underperformed sharply. And at times, it can follow its own boom-bust rhythm, regardless of macro conditions.

Risk analysis: Crypto vs. stocks in a recession

Recessions test how different asset classes behave under pressure. Here’s how crypto and stocks compare across key risk areas:

Volatility

Cryptocurrencies are far more volatile than stocks. Even in stable markets, Bitcoin can swing 5 – 10% in a day, while the S&P 500 typically moves 1 – 2%. During major economic crises, that difference can become more extreme.

Bitcoin usually moves in the same direction as equities but with amplified force — often 3 to 5 times more. This means crypto may rally harder in recoveries, but it also collapses faster in panics.

Liquidity

Both U.S. stocks and major cryptocurrencies are liquid under normal conditions. But during panics, their liquidity behaves differently.

If sentiment turns, liquidity can vanish quickly. We have seen exchanges pause withdrawals or face cascading liquidations when large sell-offs occur.

Regulation and protections

The U.S. stock market operates under strict regulatory oversight. Public companies must disclose earnings and investor protections like SIPC insurance and anti-fraud laws offer some safety in turbulent times.

During recessions, regulators may even step in with emergency measures, as seen in 2008 (for example, banning short-selling of financial stocks in 2008 or providing stimulus).

By comparison, crypto still operates within an uncertain and uneven regulatory environment. Most exchanges and token issuers operate with minimal oversight.

Adoption and value anchors

Stocks are backed by real businesses with earnings, assets, and dividends. During a downturn, that underlying value can attract buyers and offer some price support.

Stocks are also widely held by pensions, mutual funds, and institutions, which makes them less prone to mass liquidation. Crypto adoption has grown, but the bulk of the investment is still mostly concentrated among retail and high-risk funds.

Crypto doesn’t generate cash flows, so its price depends on sentiment and perceived utility.

Portfolio strategies for a recession

If you are preparing for a recession — whether you favor stocks, crypto, or both — it’s wise to formulate a plan that balances risk and reward. Here are some portfolio suggestions to consider based on your diversification preference, personal risk tolerance, and time horizon:

• Diversify across asset classes: Accumulate a combination of stocks, bonds, cash, and crypto. Don’t overexpose your portfolio to one asset class or sector. Diversification can limit damage when one asset crashes (even if it does’t eliminate all losses).
• Align with your risk tolerance: You might want to avoid heavy crypto exposure if sharp drawdowns stress you out. Stick with stable assets like blue-chip stocks or bonds if you’re risk-averse. Limit crypto to a small percentage (e.g., 5–10%) if you want exposure but prefer to cushion against volatility.
• Maintain liquidity for short-term needs: Keep enough cash or liquid assets for emergencies. Do not rely on selling volatile assets like crypto or stocks during a downturn. Note that liquidity acts as recession insurance.
• Think long-term and rebalance when needed: Recessions are temporary, so try staying focused on your long-term plan. Rebalance if asset values deviate from targets. Focus on quality — for instance, strong companies in stocks and credible projects in crypto.
• Stay informed but disciplined: Follow macro news, but don’t panic or overtrade based on headlines. Emotional decisions — especially during volatility — often lead to losses. Stick to your strategy and filter out short-term noise.

Crypto or stocks: Which fits your portfolio better?

While stocks offer stability, crypto may offer long-term upside (assuming you approach it carefully). A balanced recession strategy often includes core stock exposure and, for those comfortable with some risks, a comparatively smaller crypto allocation. The trick is to find the right balance based on your strategic objectives and risk tolerance.

Recessions eventually end, and markets recover. Your aim should be staying invested, not succumbing to panic, and emerging stronger when conditions improve.