The odds of an economic recession are increasing, and this might lead Bitcoin (BTC) to different outcomes, according to industry experts.
Aurelie Barthere, Principal Research Analyst at Nansen, believes the chances of a recession in the second half are higher than the historical average. She told CryptoSlate:
“I believe there is a 40% probability for a recession in H2 2024 (30% shallow, 10% hard landing). It is above the historical average of 17%.”
Her predictions are based on the fact that central banks have conducted 35 rate cuts over the last three months. For reference, when the 2009 financial crisis reached its peak, central banks executed 76 cuts.
According to Bitfinex analysts, this might affect BTC in different ways, such as investors perceiving Bitcoin as a safe haven asset during economic uncertainty. Additionally, this could prompt wider institutional participation in crypto, as institutions seek to hedge against macroeconomic risks, providing a stabilizing effect on the crypto market.
The analysts said:
“As a result, this could enhance liquidity and potentially increase the valuation of leading crypto like Bitcoin and Ethereum.”
Fideum co-founder Darren Franceschini also believes in this bullish case based on Bitcoin being seen as a hedge against economic uncertainty and inflation. He said:
“As central banks cut rates and potentially implement more accommodative monetary policies to combat recession fears, this could lead to increased liquidity in financial markets.”
Franceschini added that some of this liquidity might flow into crypto as investors seek alternative assets. Furthermore, the perception of Bitcoin and its rising popularity among the wide mainstream investor audience of “digital gold” or a store of value during economic turbulence could attract more investors to the crypto market.
On the other hand, Bitfinex analysts believe the broader crypto market and altcoins may suffer due to decreased liquidity and risk appetite. Investors may become more risk-averse, pulling funds from high-risk assets like smaller cryptocurrencies into safer investments.
They also highlighted the additional regulatory risk, as a shaky economic environment might trigger governments to apply stricter regulations aimed at protecting consumers.
Macroeconomic instability
The global economy is being pressured by multiple points of stress. Barthere highlighted that Eurozone growth has been weak since 2022 due to the energy shock from the Ukraine war and…
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