Fears of Recession may benefit Bitcoin (BTC)

Fears of a recession

As fears of a recession grew over the course of the last month, the bitcoin market (BTC) and digital assets in general had an unexpected resurgence that caught many by surprise. Does the argument that bitcoin’s features make it a safe haven hold water with some investors? When put to the test, can BTC show to be recession-proof?

After yesterday’s brief rally that saw the cryptocurrency reach highs of $40,280. Bitcoin has failed to gain ground above the $40K mark once more. BTC has fallen to lows of $38,750 in today’s market action, however the benchmark cryptocurrency is currently trading just around $39,000, according to data from cryptocurrency price tracker CoinGecko.

In addition to the stock market, the overall market has experienced a negative reversal. With the total market capitalization down 1.8 percent. Bitcoin is up a little more than a percent in the last 24 hours, while Ethereum is down 1.5 percent in the last 24 hours.

‘Risk-on’ Bitcoin

The current troubles of Bitcoin coincide with a slowdown in the stock market on Friday. As shares of IT behemoths Amazon and Apple plummeted following their respective quarterly reports, which were released a day before. In early morning trade, the S&P 500 was down one percent, while the Dow Jones Industrial Average was down 0.4 percent. The Nasdaq Composite was down 0.7 percent, according to preliminary figures.

Concerns about the tightening monetary policies of the United States Federal Reserve are fueling the recent spike in volatility. It was which expected to result in greater losses. The Federal Reserve, which meets next week, is widely expected to raise interest rates by 50 basis points, a move that market watchers believe could have a negative influence on the economy’s recovery.

An analyst at digital asset broker GlobalBlock believes that the likelihood of a bigger interest rate hike. Overtightening from the Federal Reserve might cause economic deterioration to accelerate may be a bullish signal for Bitcoin.

Sotiriou wrote the following in an email sent out on Friday:

“As recession fears grow, the economy of the United States fell by 1.4 percent in the first quarter of 2022. This, in my opinion, is optimistic for risk assets such as Bitcoin and equities. Since the Federal Reserve may become less hawkish in order to avert a recession.”

The 1.4 percent year-over-year decrease in GDP in the first quarter of 2022 represents the first time the economy has contracted by this much since the second quarter of 2020.

Bitcoin’s future

However, for investors, it is worth noting that the correlation between Bitcoin and stocks has grown over the past several months, which is encouraging.

As a result, falls in the financial markets due to concerns about geopolitical unrest and new COVID outbreaks could cause BTC to fall in value.

On the other hand, a surge in upward momentum in the stock market could also assist Bitcoin. This is through immediate resistance levels.

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