UN warns Fed of recession
Amid fears of an incoming financial recession, some analysts are predicting a key reversal in the crypto market. Currently, the cryptocurrency market is highly correlated with the stock market, but the possibility of an economic downturn could mean an advantage to crypto. In this context, a UN agency had warned several central banks, including The Fed, against the risk of recession on Monday. Meanwhile, cryptocurrency prices in recent weeks have remained largely stagnant around existing price ranges.
Advantage Crypto If Recession Worsens?
Central banks risk chances of recession followed by prolonged stagnation if they continue to raise interest rates, the agency said. According to a Wall Street Journal report, the agency said the Fed risks causing significant damage to developing countries if it continues with rapid rate hikes. The United Nations Conference on Trade and Development (UNCTAD) said a percentage point increase in the Fed’s interest rate significantly reduces economic output in other rich countries. UNCTAD Secretary-General Rebeca Grynspan said there is still room to avoid the recession.
“There is still time to come back from the brink of recession. We have the tools to curb inflation and support all vulnerable groups. But the current course of action hurts the most vulnerable, especially in developing countries, and risks tipping the world into a global recession.”
What will a recession mean for the crypto market?
In this context, opinions are divided on how cryptocurrencies would fare in a recessionary environment. While a majority of the community believes cryptoassets will decline if the stock market falls, there is a growing argument for an opposite view. American investor Stan Druckenmiller, who is certain of a recession in 2023, feels that it will favor the crypto market. He said that cryptocurrencies could benefit from the distrust of central banks. Likewise, experts feel that Bitcoin is likely to diverge and forge its own path, thanks to its decentralized nature.
While there were several headwinds in the macroeconomic scene recently, the Bitcoin (BTC) price remained largely flat over the past 30 days. A majority of days over the past month saw BTC trading below the $19,700 level. At the time of writing, the cryptocurrency is trading at $19,450, up 1.31% in the last 24 hours, according to CoinMarketCap.
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