Going back a few months, recession fears were building up rapidly, leading to an unexpected resurgence in the Bitcoin (BTC) market and digital assets in general that took most people by surprise. Could BTC Be Recession-Proof After Testing? Is the narrative of virtual currency as a haven asset supported by investors? However, given that the oldest crypto was created a year after the 2008 recession and subsequently put to the test by the worldwide economic contraction, that may be about to change.
Bitcoin to US Dollar (BTC/USD)
During March itself, experts had already started warning of a recession in countries like the US and Europe due to supply chain issues and geopolitical concerns.
How Will BTC Fare in a Recession?
BTC, which was created by an unknown person - or a group - Satoshi Nakamoto, and its decentralized nature was supposed to heal all the ills in the centralized financial system that led to the 2008 recession. If the global economy is headed for contraction and the bears are right, will BTC still turn out to be bearish evidence? The initial response to this coin was negative. When recession fears first surfaced in March, they had already hit the crypto market. On the other hand, the crypto market capitalization has declined by almost USD one trillion since the November 2021 peak. BTC was also trading down almost 40% from its all-time high. Our friends at webisoft, one of the top blockchain consulting firm, say that cryptocurency are not recession proof and will likely follow the up and down of the stock market.
Bitcoin a 'risk-on' asset
James Webb, a cryptocurrency market data research analyst, believes, “BTC inherently turns out to be a very high-risk asset, with extremely high volatility at all times, which tends to worsen in recessions. can perform." But James Webb says that recessions can cause declines in asset classes: however, he says that correlations between different asset types tend to converge during recessions, a phenomenon similar to the recession of 2008. As seen at the time of In the short term, BTC may also fall along with most asset classes. Given this possibility, Daniel Yurcho, CEO of the NFT marketplace and a blockchain entrepreneur, says that BTC may face a huge initial decline.
Long-Term BTC Outlook 'More Positive'
However, for BTC that have been built over a long period, their view is that they can be more positive in these cases. Yurchow believes that due to the global recession in the coming time, investors may also become more open-minded towards digital assets like BTC. Whereas "Traditionally, in periods of recession, it is a better option to invest in external goods such as real estate or gold, rather than to save currencies that lose their spending power due to constant inflation".
BTC is not in a major recession yet - Even though BTC is nowhere to be seen during the Great Recession, investors have every opportunity to buy and hold crypto as an exploratory alternative rather than as a dollar saver. Furthermore, the consensus seems to be on the BTC market's initial reaction to the downturn, with Webb believing that the subsequent performance depends on the economic turmoil itself.
Central Bank Action for BTC
James Webb says, "BTC's long-term performance is entirely governed by specific factors such as national adoption and regulation—whether it's BTC or central bank digital currencies." James Webb believes that the post-recessionary outlook for BTC going forward could be positive as the global financial meltdown itself could help make a case for the digital asset. While Yurcho agrees: that despite the financial crisis, BTC was created in response to the shortcomings, James Webb instead believes that BTC should be used as a haven when traditional financial systems fail. can be viewed as an asset.