As concerns about a U.S. recession and geopolitical uncertainty shake global markets, analysts have conducted an in-depth analysis of a possible recession this year and its impact on Bitcoin and other cryptocurrencies, The Block reported.
Analysts from cryptocurrency exchange Bitfinex said:
"Concerns about a global recession are indeed legitimate given current economic indicators and recent actions by central banks."
Analysts pointed out that in the past three months, central banks around the world have cut interest rates a total of 35 times, which exceeds the level of interest rate cuts in early 2024. This kind of proactive easing policy is reminiscent of the peak of the financial crisis in 2009.
While global inflation levels are expected to ease this year, economic growth forecasts remain weak. The International Monetary Fund (IMF) predicts that global economic growth will fall slightly from 3% to 2.9% in 2024. At the same time, persistent inflationary pressures have forced central banks to take action to stimulate the economy and avoid further recession.
Analysts at Bitfinex also pointed to the large amount of speculative-grade debt maturing in the United States in 2024, as well as falling bond yields, as signs of stress in financial conditions. Investors are turning to safer assets and yields are falling, classic recession indicators that reflect a lack of confidence in continued economic growth.
Aurelie Barthere, chief research analyst at on-chain analytics platform Nansen, agrees that these concerns are well-founded. She pointed out that economic growth in the euro zone has been weak since the energy shock caused by the Ukraine war in 2022, and coupled with the threat of possible U.S. tariff hikes and the bursting of China's real estate bubble, the global economic outlook has become even bleaker.
Aurelie Barthere said economic growth in the United States is also slowing, although there are currently no obvious areas of vulnerability other than elevated stock market valuations. She predicted a 40% chance of a recession in the second half of 2024, which is well above the historical average of 17%.
Against the backdrop of a recession, analysts at Bitfinex believe that Bitcoin could benefit from its status as a safe-haven asset. Typically during periods of economic uncertainty, investors flock to assets considered stores of value, and demand for Bitcoin as "digital gold" may increase as a result. However, analysts are more cautious regarding the rest of the cryptocurrency market, especially riskier altcoins. They warned that reduced market liquidity and lower risk appetite could lead to a decline in the value of these assets.
Valentin Fournier, an analyst at digital asset research firm BRN, said that although Bitcoin has shown some rebound pressure after a sharp decline earlier this week, the market still needs stronger catalysts to support this positive trend. He pointed out that the number of initial jobless claims and the upcoming consumer price index (CPI) data will be important indicators to observe the state of the U.S. economy. These data will determine whether the Fed has more room to avoid a hard landing of the economy.
Additionally, Fournier cited potential interest rate cuts in the medium term, the U.S. election results, and the potential creation of a national Bitcoin reserve if Donald Trump wins the election, as potential catalysts in the coming months.
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