Fueled by the Russian invasion of Ukraine, and rising global inflation, most economists are convinced a recession is imminent in the coming quarters. The past recessions have been characterized by the stock market plunge and high liquidations. With the crypto market recording high volatility, a recession could send prices on a nosedive, perhaps similar to the 2020 Black Thursday or worse.
Should a recession fail to happen, top economists have indicated the global economy will slow down this year. According to Kristalina Georgieva, managing director of the IMF, the United States – a country that controls about 25 percent of global economic activities – can engineer a soft landing through quantitative monetary policies to avoid a recession.
“The US economy is also going to slow down this year. But — at least, based on the data we have today — we think the US would be able to go through the year narrowly avoiding falling into recession,” Georgieva said in an interview on CBS’s “60 Minutes”.
Bitcoin and Crypto Under Recession in 2023
The Bitcoin market gained approximately 40 percent in January and saw heavy liquidations from short-term holders and miners. However, the economic slow growth and unresolved mega cases like FTX could push Bitcoin prices further down.
Senior macro strategist at Bloomberg Intelligence, Mike McGlone, thinks the crypto market may be facing the first real recession.
“The last significant US economic contraction, the financial crisis, led to the birth of #Bitcoin, and the possible coming economic reset may mark similar milestones,” McGlone noted.
With a high correlation between cryptos and top indexes around the world including the Nasdaq, Dow, and S&P 500, analysts warn their demise will trickle down to the former. Moreover, crypto cash inflow to DeFi platforms is heavily controlled by institutional investors ranked under top equity indexes.
