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Inferno market report: how will bitcoin fare in a recession?

Inferno market report: how will bitcoin fare in a recession?

Analysis

With talk of a global recession growing louder, it’s time to consider what BTC might do in this scenario – one it’s never seen before.

 

Bitcoin is well into its new bull market, having seemingly completed its first leg up and pullback and now looking at getting the job done in earnest. At the same time, the global markets are looking a little shaky. We’ve recently seen the first interest rate cut by the Fed in 10 years – something that has never happened in Bitcoin’s history. Trade wars with China are hotting up, and a global slowdown is underway.

 

This is new territory for bitcoin. What will happen if we really see a major recession? Will it be a safe-haven asset, or will it get sold like stocks and other risk-on assets?

 

Two possibilities

There are probably two major scenarios here, depending on how bad and long the recession is. 

  1. Stock market crash but a fast recovery. Bitcoin might get hit like most other asset classes, but some traders could decide to put money in crypto as an undervalued and uncorrelated asset. If there’s lots of international tension (China, Iran, North Korea…) involved, then as an independent asset outside of the control of governments and central banks, bitcoin could prove quite popular.
  2. Deeper recession. Bitcoin could be more seriously impacted. When people lose their jobs, they tend to sell liquid and convertible assets to see them through. Retail crypto holdings could be badly hit; institutional ones, perhaps less so?

 

There are lots of variations on what could happen, and lots of potential complicating factors. More failing states with hyperinflation would place additional demand on BTC. It could also see increased use as a way of avoiding capital controls imposed by countries like China to prop up their economies.

So we can take an educated guess, but we won’t know for sure until it happens. That it is going to happen is something that is becoming clearer by the day.

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