Recession, Bitcoin and the crypto market: how do they influence each other? In this opinion ECHO special we deal with the general economic situation and its influence on the crypto market.
“The U.S. economy is worse off than we thought.”
At the moment, there are more and more voices and signs that the US is heading for a recession, some are even sure that it is already in it. There is a recession, to put it quite succinctly, when the signs on the markets and in the economy itself are too red for the bears. From a technical point of view, a recession is a recession when the economy springs at least two quarters in a row, compared to the same quarter of the previous year.
And indeed, things are looking bleak overseas. The S&P500, an index that tracks the shares of 500 of the largest listed companies, posted its worst performance since 1970 at the end of the second quarter – even including the Global Economic crisis in 2008. The stock markets are giving way and things are also looking bleak for Bitcoin and its ilk at the moment. The unks are calling as loudly as they have not been for a long time. One of many who gets to the heart of the matter: Anthony Pompliano. The Bitcoin expert recently announced in a video:
The US economy is worse off than we thought.
Anthony Pompliano
However, “Pomp” is not alone in its assessment. Tesla CEO and Dogecoin shill Elon Musk also said in early June that he had a “super bad feeling” about the economy. In an internal email, Musk asked his entourage to pause all new hires for the time being.
Star economist Nouriel Roubini a.k.a. “Dr. Doom” blew into a very similar pipe, albeit with more fervor. He told Bloomberg on June 21 that the US economy was already very close to a recession.
In Germany, too, the situation does not look particularly pleasing. Jens Südekum, professor of economics, foresees a severe recession if Russia turns off the gas tap. Companies would have to shut down or completely stop production, the economic performance would be significantly weakened.
What does a recession mean for Bitcoin?
The Bitcoin price has had a strong correlation with the US stock indices Nasdaq100 and S&P500 in recent months. In general, Bitcoin is often considered a riskio asset, from which investors part in difficult market phases. This is how BTC-ECHO editor-in-Chief Sven Wagenknecht explains:
Bitcoin cannot escape a recession either. Cryptocurrencies are still considered high-risk assets for most investors. In uncertain times, these are reduced and reallocated to relatively safer investments such as value stocks or bonds with a high credit rating. Especially retail investors, who have to accept real losses of purchasing power in the course of high inflation, are inclined to forgo the Bitcoin investment in order to meet expenses of daily needs as well as long-term liabilities (real estate loans or similar). The situation is complicated by rising key interest rates, which have a negative impact on assets without a cash flow.
Sven Wagenknecht, Editor-in-Chief BTC-ECHO
As explained in the BTC ECHO market report, further upheavals in the international capital markets could lead to Bitcoin testing new annual lows. In short: Should there be a recession, Bitcoin & amp; Co. should also be significantly affected again.
However, it is not yet possible to estimate with certainty how Bitcoin will behave in a recession in the long term. Nevertheless: the crypto market has already experienced some crashes, Bitcoin was not declared dead once. Because: The fundamental value proposition of Bitcoin and blockchain technology has not changed. If you listen carefully when the guns are thundering, you can prove a good smell, especially in a recession. This is how Sven Wagenknecht complements:
As bad as the macro situation and the short- to medium-term prospects are, it should not be forgotten that prices have already corrected a lot. For investors with a long-term investment horizon and a penchant for countercyclical investing, this is not the most unfavorable situation.
Sven Wagenknecht, Editor-in-Chief BTC-ECHO
