Will Bitcoin tank if a recession hits, IMF issues warning
The crypto market has shown signs of slowing recently as the prices of Bitcoin and other crypto assets continue to fall. With interest rate hikes from most of the global central banks, the global economy is tightening. The impact on both crypto and traditional markets is significantly devastating.
After the events, the International Monetary Fund (IMF) warned of an economic downturn. Furthermore, there is talk of a possible worse global recession in 2023. This means that the financial markets will go risk-off, creating extreme fear for the markets.
Therefore, there could be a drastic decline in the prices of crypto-assets and conventional stocks.
BTC price correlates with stocks?
The price of Bitcoin has shown a strong correlation with equity assets for more than a year. This is seen with most of the trends for BTC and some stocks in most cases. Several factors and circumstances have been highlighted as explanations for the connection. One of the stocks with a solid link to Bitcoin is the S&P 500.
Bitcoin witnessed a price drop during the global pandemic recession of 2020. This was the same story for equity shares. But as economic conditions gradually developed positively, the system went accordingly. As a result, the crypto and stock markets sold off in December 2021 and May 2022.
Most of the correlated trends can indicate the performance of the securities markets when they reach a certain liquidity threshold. But conversely, it may indicate that institutional funds have reached a significant part of the capital inflow.
The price of Bitcoin can be thrown around firmly and violently despite the causal factors of a declining economy. However, the primary crypto asset may face a drastic fall once there is a global recession. This will drive investors to withdraw their funds through massive selling.
BTC can offer long-term bullish outlook
The price of Bitcoin will increase in a situation of favorable intervention. For example, the US Federal Reserve and other central banks globally may heed the IMF’s warnings and cut interest rates to curb recession. Such a situation will create a price rise for Bitcoin and other crypto-assets. Equity shares will also work positively.
However, there may still be hope even without central bank intervention. This means that a recession will emerge and drag down the crypto market, with the price of BTC dropping. Such lower prices could become an attractive entry point for some crypto asset investors.
Remember, the recession of 2008 did not give Bitcoin a prominent role. However, after the March 2020 collapse, the primary cryptocurrency experienced a massive bull market that increased its dominance in the crypto market. Since then, Bitcoin has risen far above stocks and has maintained its position.
With the overall turn of events, Bitcoin depicts a bullish outlook on a long-term basis. At press time, the BTC price is around $19,137, indicating a drop over the past 24 hours.
Featured image from Pixabay and charts from TradingView.com
