A fear that could be fulfilled and affect the price of Bitcoin

The United States has two sad chapters in the history of its economy. The first occurred in the year 1929 and was called the Great Depression, a phenomenon that exploded due to the bankruptcy of Wall Street and the collapse of the banking system of the time, which cost billions of dollars and succumbed to the country in poverty. The other was the Great Recession, which began in 2008 and is the crisis that gave birth to Bitcoin, as well as left thousands of Americans bankrupt and generated insecurity in the real estate market.

Undoubtedly, they were two events that forever changed the lives of Americans in that period and had an impact on the world economy. Therefore, it is not unreasonable that the words “inflation”, “unemployment”, “crisis” and “recession” generate terror in the population. A fear that is currently being felt on the streets of the United States.

According to a survey by the firm Alianz Life, 6 in 10 Americans feel a recession is just around the corner. The term “recession” means that a country’s economy experiences a decline in Gross Domestic Product (GDP) for two consecutive quarters. Currently, the US economy contracted in the first three months of 2022, registering one of the highest inflations in the last 40 years and with the stock market in full decline.

If that wasn’t enough, reports from the Institute of Product Management (ISM) confirm that the picture can get even more complicated. Mortgage rates, which refers to the price of housing in the United States, are skyrocketing at historic levels.

Labor in industrial sectors is also scarce, so their demand is high and their price is quite expensive. The level of unemployment in the United States is currently very low, despite the economic problems that the country has been going through, while wages have had to increase to recover from the uptick in inflation.

All this is happening while businesses are growing more slowly and the demand for products is slowing down due to the economic measures imposed by the United States Federal Reserve (FED), who have increased interest rates to 0.5%. This series of situations it could provoke a phenomenon of stagflation in the American country, a word that describes the process by which inflation accelerates, unemployment rates grow, and the economy stagnates.

If we take these data into account, it could be said that the North American country is on alert to the possibility that this new quarter will also have negative numbers. If it is fulfilled, the United States would face an even more complicated economic situation than the one it experienced in 2020 after the Covid-19 pandemic was decreed. But what do specialists say about this issue?

For this year maybe not, but for 2023 it is possible

Economists following the US case are not expecting a recession for 2022, mainly because they are confident in the decision that the Federal Reserve has made to raise interest rates, which would slow down the financial crisis. By increasing borrowing costs, consumer demand could be reduced, a strategy that would have the ability to slow down the inflation produced by the printing of inorganic money.

Although experts on the subject recognize that the United States has a still strong economy and a healthy labor market, they claim that the Fed’s actions could also have a big impact on domestic business who are already suffering the first ravages of the economic crisis. In this sense, it is predicted that there are more recession dangers for the year 2023 when the situation will be more precarious for traders. In the case of economist Matthew Luzzeti, he believes that, if a recession is over by 2022, it will be mild.

Under this same perspective, experts Larry Summers and Alex Domash argue that there is currently a high possibility of recession in the United States. This is due to two indicators that have previously predicted moments of recession in the North American country, which today are again at levels that indicate an imbalance in the economy. These are skyrocketing inflation and a low unemployment rate, which could lead to a long-term collapse of the system.

While all this is happening, economists from other parts of the world are worried about the possible repercussions that this situation will have on the finances of their own countries. That is the case, reported by CriptoNeticias, of Juan Ramón Rallo, who speculates that if the United States enters a recession, this fact will have an impact on the already weakened economies of the countries of Europe. However, the businesses of the European continent will not be the only ones to suffer the impact, but also the cryptocurrencies that lately dance to the sound of what is happening in the United States.

How will all this affect the price of Bitcoin?

Those who have not been closely following the price of Bitcoin in recent months may be wondering why the US economy has something to do with the value of the cryptocurrency created by Satoshi Nakamoto. However, to the surprise of many, the reality is that today the price of Bitcoin is reacting on a par with the measures of the Federal Reserve of the North American country and the behaviors of the Wall Street stock exchange.

This situation is mainly due to the fact that, since the beginning of 2022, Bitcoin is being considered, in the eyes of investors more than anything, as a risk asset. In this sense, it is seen as a highly speculative investment, which rubs shoulders with some of the most popular stocks on American stock exchanges, such as those of technology companies. When Google, or Apple, or Telsa (and even Meta) have had sudden movements in their price, Bitcoin has behaved in a similar way; demonstrating that both markets have a high correlation.

This makes sense especially if we take into account that several of the most important institutional investors of Bitcoin are exactly companies that are listed on American stock exchanges, as is the case with Microstrategy, Block or Tesla. That is, a good part of the capital that has helped BTC climb to new price levels, comes exactly from these firms whose growth largely depends on how healthy the US economy is.

As if that were not enough, it should also be borne in mind that, with the prohibition of Bitcoin in China, a significant volume of miners was located on American territory. In this way, the regulations of the American country have begun to have more and more relevance in the price of cryptocurrency, since their market power shares have increased compared to years ago.

Given this scenario, it would not be surprising that the current economic situation in the United States continues to affect the Bitcoin market. The reality is that, if loans become more and more expensive, fewer people will be willing to borrow money to generate profitability in the stock markets, including cryptocurrencies in this panorama. In times of crisis, instead of risking capital, there are not a few investors who prefer safe haven assets of value.

In this sense, it is possible that the only way for Bitcoin to gradually move away from the tidal wave that can be a financial crisis in the United States, is that the narrative of the use of cryptocurrency as a safe haven asset of value is entrenched.

A perspective that the Bitcoin community supports by considering that the currency has the potential to increase its value in the long term. In this sense, it it promotes the accumulation of BTC under the idea that in a few years they will be even more valuable than today. Currently, although the price has plummeted, those investors who apply this strategy have reached the highest level seen in the history of cryptocurrency.