Holding Some Bitcoin Just Helped Me Sleep Better At Night. Here's How

A few nights ago, I was lying sleepless in bed, mentally reviewing the latest slate of possibilities for the worst-case economic scenarios that might be caused by the war in Iran. In particular, the high probability of an incoming energy crisis causing inflation to spike was concerning me.

But before my thoughts could spiral into forecasting my own imminent economic demise, I had a moment of clarity when I remembered that I own some Bitcoin (CRYPTO: BTC). That then let me fall asleep quite quickly afterwards. Here's why.

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This asset is unprintable

Before we get into how Bitcoin exerted such a calming effect, let's unpack the current situation and the macro problems it's likely going to cause.

As you've doubtlessly heard by now, the Strait of Hormuz crisis is the largest oil supply disruption in modern history. When energy costs spike, inflation follows, because the cost of energy is baked into most goods and services. That puts central banks in a bit of a pickle. They can choose to raise interest rates and risk recession or stagflation, or choose to hold rates steady and watch prices climb until demand starts to be destroyed, which could then also lead to a recession or stagflation.

For its part, the Federal Reserve has so far signaled a hawkish posture, with markets pricing in zero rate cuts for 2026. Aside from controlling the cost of borrowing money via interest rates, governments also often respond to economic shocks by expanding the money supply. Every dollar added to the circulating total dilutes the purchasing power of the other ones.

Thus, if the Strait remains closed, and energy transit disrupted, the state of play right now suggests that prices for many things are going to climb, potentially sharply, and possibly for much longer than just a couple of months. If there's substantial economic disruption after the energy shock itself subsides, there may be some new money created as well.

This is where Bitcoin's properties become extremely useful. The protocol caps total supply at 21 million coins, and no government can print more of it. No crisis, no war, and no act of Congress can change the halving schedule that determines how much Bitcoin is produced by mining. That should, in theory, enable it to retain its purchasing power even during a substantial amount of inflation.

Once I put all of those thoughts together, I realized that even if my dollars started to lose a lot of their value, I wouldn't be completely defenseless, thanks to my frequent accumulation of very small quantities of Bitcoin, and I promptly fell asleep.

Yes, this really happened.

The thesis still has limits

Now, time for the counter-narrative.

In short, Bitcoin did not behave like a safe haven on the first day of the conflict, Feb. 28. It dropped moderately, along with most of the market. Gold, the canonical safe haven asset that doubles as the canonical inflation hedge asset, surged in the first few days while Bitcoin was stumbling. So there's clearly something to say for just holding gold for stability, as it doesn't perform exactly the same, and it's probably in general a somewhat more effective hedge against downside.

Nonetheless, over the weeks of the conflict so far, Bitcoin has recovered and gone on to outperform gold. The pattern is that it sells off during the many periods of acute panic prompted by the war's events, and then rallies as investors digest the inflationary implications of sustained conflict.

The comfort I felt wasn't about tomorrow's price for the coin, or even next month's, as I have no idea what it will be. It was about holding an asset with a fixed, declining issuance schedule in a time when governments will almost certainly soon opt to expand the money supply to absorb the ongoing economic damage. There's no guarantee that Bitcoin will perform well. It's just that it's not capable of experiencing some of the possible failure modes of the dollar and other fiat currencies.

Thus, if you're considering whether cryptocurrency is a good investment in this chaotic environment, the main consideration is your time horizon. Dollar-cost averaging (DCAing) with a small allocation, and holding it for five years or more, means you'll capture the benefit from Bitcoin's structural scarcity without needing to pay attention to any single price level.

Twilight hour financial anxieties probably won't vanish permanently if you hold Bitcoin, but knowing that part of your portfolio can't be debased by any central bank's emergency response will probably help you sleep a bit better anyway.

Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.