World Teeters on Recession: What it Means for Crypto (Opinion)

U.S. Treasury yields edged up Monday as markets focus on inflation woes and recession risk.

All eyes are on a two-day Federal Reserve policy meeting that concluded this Wednesday, and the central authority hiked the interest rates by 75 basis points, as many expected.

A slew of tech earnings reports this week and the latest GDP figures, which showed the second consecutive quarter with negative GPD percentages, gave analysts a better gauge. Meanwhile, many warn the U.S. may already be in a recession, although the authorities are still denying it.

A 2022 Recession vs. The 2020 Pandemic Crash

The Commerce Department defines a recession as “a significant decline in economic activity spread across the economy and lasts more than a few months.”

GDP declined in Quarter 1 of this year on pace for an annual decrease of 1.6%. Q2 2022 ended with a decline of 0.9%. The Fed has suggested it might be possible to pull off a somewhat “soft landing.” But after nearly three years of easy dollar loans, the FOMC may not be able to outmaneuver an economic crunch.

Cryptocurrency has gone through varying correlation regimes with stocks. But is there any correlation, inverse or positive, between crypto and GDP growth? It’s difficult to be sure. That’s because, in the industry’s entire short history, there has only been one very brief recession. That was in 2020 at the height of the pandemic and lockdowns.

During that time, from February through April 2020, bitcoin’s price fell markedly along with other asset classes. But by July, it had recovered its losses. After that, it skyrocketed by over triple-digit percentages until March of 2021. By then, the crypto exchange rate of bitcoin to USD exceeded $60,000 for one bitcoin.

This time around, other factors than GDP on the price of bitcoin are very different from 2020. The extreme worldwide fear, uncertainty, and doubt at the start of the coronavirus pandemic are behind us. Cash is king during times of broad economic uncertainty about the future.

While the near future may have a recession, inflation, or both in-store, at least the threats and weaknesses on the horizon are something businesses, and markets understand. It’s a far cry from the global disruption of the coronavirus pandemic.

Crypto May Benefit From Recession Like Fortune 500

Cryptocurrency markets, like all markets, move with the ebb and flow of the U.S. federal funds rate. As investing extraordinaire Warren Buffett has said:

“Interest rates are to asset prices what gravity is to the apple. When there are low interest rates, there is a very low gravitational pull on asset prices.”


“The most important item over time in valuation is obviously interest rates.”

It would be surprising, however, if analysts were able to demonstrate a connection between crypto prices and the total sales of every business in every sector in the country. Even designing a rigorous methodology to answer that question would be a quixotic undertaking.

But one thing can be said for sure about economic downturns and entrepreneurial ventures like all of those powering the cryptocurrency industry today. Recessions are fertile grounds for startups that go on to become some of the largest and most stable value creators in the economy.

In 2008 more than half of the companies among the Fortune 500 had gotten their start during a previous recession. They also created less volatile, more secure jobs than the broader economy.

That’s why the Kauffman Foundation proclaimed during the Great Recession by mid-2009 that: The economic future just happened.

Related Posts

Brazil’s Largest Broker XP Just Launched Bitcoin Trading Services

The broker has 3.6 million users and its new trading platform developed in partnership with the Nasdaq can scale to support one million users for bitcoin trading….

NFT Games Are Better Than Traditional Games, Urvit Goel

The gaming industry is one of the oldest in existence. But changes came to the sector with the advent of blockchain technology and NFT. Now, a lot…

Sri Lankans Scammed out of Millions by Fake Crypto Schemes

Ponzi scammers are compounding the economic misery of Sri Lankans by swindling them out of their savings with bogus crypto schemes. Crypto investor Harshana Pathirana told Al Jazeera: “I…

ETH Rejected From $2K, Here’s the Critical Support to Hold (Ethereum Price Analysis)

Ethereum has experienced a 6.6% correction from the daily high it recorded at $2012. The critical support level lies in the price range between $1700 and $1800,…

Cardalonia Debuts Metaverse Map Demo, Prepares For Exchange Listing As 70% Of Lonia Token Presale Allocation Gets Filled

Cardalonia, a play to earn medieval-themed Metaverse project built on the Cardano blockchain, has released the initial demo of their metaverse map ahead of their Cardalonia Land…

U.S. Senators Call for Withdrawal of Crypto Guidance in Open Letter

U.S. Democratic Senators Elizabeth Warren, Sheldon Whitehouse, Bernard Sanders, and Richard J. Durbin wrote to the Office of the Comptroller of the Currency (OCC), expressing concern that…

Generated by Feedzy