Investing $3,000 in Bitcoin (BTC -1.48%)

Investing $3,000 in Bitcoin (BTC -1.48%) might not seem like a wise financial move at the moment. The markets are awash in an absolutely confusing whirlwind of threats

The article discusses investing in Bitcoin as a relatively safe option in a turbulent market.

With the markets in an absolutely confusing whirlwind at the moment, it's no wonder that many investors are having second thoughts about putting any money to work.

As the host of the Breakpoint Trading podcast, I often advise listeners to consider dollar-cost averaging into an asset they like. But even that advice, which usually serves investors well, is easier said than done when there are so many threats to market stability.

If you're not in the mood to hold cash and let it lose value due to inflation, then what's the safest thing to do? Perhaps park your money in an asset that's going to be fairly insensitive to whatever happens next, no matter what that might be.

That's easier said than done, of course. But Bitcoin (BTC -1.48%) can actually fill this role in your portfolio -- or at least fill it better than practically any other cryptocurrency. Let's evaluate what makes it a fairly conservative investment overall, and how it might fare given the external risks in play right now.

This asset could be a respite from threats of all types

There are several features that make Bitcoin more likely than not to hold up well in the face of the uncertainty that's defining 2025 so far, even if it isn't necessarily rock solid enough to think of it as a safe haven.

First, no government can issue Bitcoin, nor can any single government control its network. This means that it should retain its purchasing power relative to any given fiat currency over time, especially if the issuers of those fiat currencies opt to print more money. If you hold Bitcoin in a wallet you control, it also means that it is very difficult or perhaps even impossible for governments to expropriate or otherwise deprive you of your coins with broad-based laws or policies.

Second, tariffs and any trade wars they start do not directly detract from Bitcoin's value. The crypto isn't widely used as a medium for purchasing goods or services, so a trade war won't make much of a difference in its daily trading volume. Nor is it possible to subject the coin itself to fees or tariffs. It's still possible that if a trade war sparks an economic downturn, that holders will sell their coins to generate the cash they need to pay their bills, but that's true of every other asset too.

Thus, if there is a recession, it will probably reduce the price of Bitcoin, perhaps a lot. But thanks to the fact that it needs to be mined to be produced, and that it gets harder and harder to mine over time via its halving mechanism, even at lower prices there will still be a constrained supply of the coin. Then, when potential buyers have a bit more capital to invest after conditions improve, a bounce back is very likely, as the asset's scarcity will only have increased. Under those conditions, the people who bought and held through the downturn will be rewarded, even if it might take a few years for them to see profits.

Don't put all your eggs in one basket

Buying Bitcoin because it's a relatively safer asset among an ocean of riskier ones is all well and good, so long as you don't overdo it.

The ultimate defense your portfolio can have is to be well diversified. Bitcoin could figure in your diversification strategy, but it can't be the only leg of the table, nor make up for holding cash. After all, if you don't have at least some cash, you won't be able to buy assets on the dip. And if all your funds are invested, you'll lose more of your portfolio's value than you otherwise would if the market crashes.

For now, don't be afraid to start dollar-cost averaging (DCA) your $3,000 into a Bitcoin position. There are a few positive catalysts, such as a proposed national crypto reserve, that could send prices skyward. But there's no hurry. This is an asset that's worth buying slowly and holding for many years. As chaotic as things are right now, there's no time like the present to start establishing your stockpile of this coin.