Bitcoin Price Could Go Either Way If Dimon’s Recession Warnings Come True (Opinion)
Economic, financial and business analysts have been on the lookout for an impending recession since the end of 2022. The only question in a field with certainty that a mild recession is looming is where?
Jamie Dimon: Bank failure could lead to recession in 2023
Will the recession emerge from a financial crisis? Will oil or another commodity trigger it? Could it start in housing like it did with the Great Recession? The critical weakness in banking that became clear to the markets in the 1st quarter of this year signals that it may start with a banking meltdown.
The IMF warned this week against “shadow banks” or non-bank-financed companies that also put financial stability at risk. Jamie Dimon, longtime chief executive of JPMorgan Chase and Co, warned in a recent letter that it won’t be anything like 2008, but the next recession will last for years:
“As I write this letter, the current crisis is not yet over, and even when it is behind us, there will be repercussions for years to come. But more importantly, recent events are nothing like what happened during the 2008 global financial crisis (which barely affected regional banks).”
If Dimon is right and the economy is more likely to fall into recession, that could be a macro headwind. Bitcoin price may face unstoppable resistance until the cycle turns. But there could be tailwinds for Bitcoin. It just depends on how the disruptions in the economy shake out.
Recession: a Bitcoin price headwind or tailwind?
A recession this year could easily put an end to the Bitcoin price rally. Furthermore, a slowdown in economic growth can push down the price and drag the entire crypto sector down with the financial markets. That would be in line with the Bitcoin-tech stock correlation trend, and investors would be inclined to risk-off in a recession.
However, it is possible that a mild enough recession with certain characteristics could send some tailwind Bitcoin’s way. The Fed will be more likely in a recession to lower interest rates to stimulate growth. It could send investor capital to crypto markets in search of returns after pushing down lending rates.
Higher rates in TradFi could be just the impetus that some institutional investors, who have dipped their toes in the crypto waters, need to dive in and make some big trades in search of alpha for their portfolios. It’s a brave new world and ever-changing, so never before has it been more true that past performance does not guarantee future performance.
