Bitcoin Gained More Than 5% in the Past Month. Is Crypto Recovering?

You might want to whisper it, but Bitcoin (CRYPTO: BTC) is moving up. On April 17 it moved over $78,000 for the first time since early February, and on April 19 it had notched a 5.7% one-month gain, though it's now below $78,000. There are good signs, but it is a bit too soon to talk about a recovery as the lead crypto is still trading almost 40% below its all-time high as I write this.

Image source: Getty Images.

Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »

Why Bitcoin's recovery may be temporary

The conflict in Iran, which began seven weeks ago, has exacerbated global geopolitical tensions and shaken markets. Not only that, energy prices spiked because the war severely restricted traffic through the Strait of Hormuz, a waterway that handles about 20% of the world's oil. One big driver for Bitcoin's recent surge is optimism about peace talks. This buoyed both crypto and stocks, so much so that the S&P 500, which tracks the performance of the 500 largest U.S. companies, just set a new high.

The potential for peace is certainly heartening, but investors may be underestimating the broader economic disruption that could weigh on prices in the coming months. Both the International Monetary Fund and the World Bank have warned of a potential global economic downturn, with high fuel and fertilizer prices likely to slow growth and push prices higher. If people are worried about how they will make rent and cover essential bills, they are less likely to invest in riskier assets like Bitcoin.

Some reporting also indicates that some investors are questioning Bitcoin's potential as a form of digital gold -- a hedge against inflation and economic instability. If they've lost confidence and sell when the price strengthens, it could dampen any rebound. In time, Bitcoin's fixed supply and lack of central government control may help it become a safe-haven asset, but it isn't there yet. Last year, it fell more than 7% while gold soared almost 65%.

Why Bitcoin still has long-term potential

One month of gains does not constitute a recovery, and it's not clear what will happen in Iran. However, in the long term, strong institutional adoption puts Bitcoin in a good position. That's supported by the fact that funds are returning to spot Bitcoin exchange-traded funds (ETFs), a sign of renewed interest.

Goldman Sachs recently filed to start its first Bitcoin ETF, just weeks after Morgan Stanley launched the Morgan Stanley Bitcoin Trust exchange-traded product. Not only that, Charles Schwab just announced it will launch a platform for customers to buy and sell Bitcoin and Ethereum directly. These moves all bolster Bitcoin's credibility and offer easier ways for investors to get exposure to the lead crypto.

Past performance doesn't predict the future, but it does offer another reason to be optimistic. Bitcoin has always dipped after setting a new high, and this slump is a repetition of that pattern. It dropped by about 70% in the six months following its December 2017 high, and fell by more than 50% after November 2021's record.

Full recovery could take time

It can be hard to tune out the noise when markets whipsaw on the latest headlines, and your crypto portfolio has fallen dramatically. However, what matters for long-term investors is how Bitcoin might perform in the coming decade. It is a risky and volatile asset, but the high institutional interest and historical price action both suggest it will not only recover but go on to break new price records.

Charles Schwab is an advertising partner of Motley Fool Money. Emma Newbery has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Goldman Sachs Group. The Motley Fool recommends Charles Schwab and recommends the following options: short June 2026 $97.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.