CoinShares expects Bitcoin to rally should the US economy enter a recession.
Digital asset manager CoinShares, in a tweet on Friday, reiterating ideas from a blog post, reveals a positive outlook for Bitcoin if the US economy slips into a recession, as recession speculations run wild following the latest US economic growth data.
[1/5] Feeling uneasy about the future of the crypto market? Our research team offers their perspective on how Bitcoin may preform in a recession and it's not as bad as you think.-> pic.twitter.com/XcMXnrigHJ
— CoinShares ?? (@CoinSharesCo) July 29, 2022
According to the blog post, Bitcoin’s recent decline can be largely attributed to the strengthening dollar, which has made it very sensitive to rate hikes. Sadly, CoinShares expressed the belief that a combination of Fed rate hikes and the worsening energy situation due to the conflict in Ukraine would lead the US and the rest of the world into a recession that would see the Fed start economic easing.
Consequently, CoinShares believes that Bitcoin, an emerging store of value and growth asset, stands to benefit from a dovish Fed and a weaker dollar. CoinShares says this will likely end Bitcoin’s lackluster moves and lead to decoupling from risky tech stocks.
It is worth noting that while the Fed refuses to declare that the US is in a recession due to positive unemployment numbers, the US economy has shown signs of weakness. Last week, it was revealed that the US economy had contracted for the second quarter in a row, a usual indicator that a country is in a recession.
“Although Bitcoin’s price performance has been weak in the face of an aggressive FED, this current hiatus in price performance may be short-lived.”
Notably, the Fed raised rates by 75 bps again last week. However, the crypto markets surged in response, with most major coins making at least 10% gains as the rate hike appeared to be priced in by the market. Moreover, July ended up being the best month for crypto assets this year, with Bitcoin surging over 17% and Ethereum surging over 55%.
It is worth noting that CoinShare’s outlook on Bitcoin closes resembles “The Doom Loop” analysis by BitMex’s Arthur Hayes. According to Hayes, the fallout from the energy crisis due to the Ukraine conflict will lead to a euro and dollar weakness. Hayes says this weakness would lead to a flight to perceived stores of value like Bitcoin and eventually drive its price to $1 million.
Notably, Hayes noted that the Doom Loop had begun following euro and dollar parity for the first time in over 20 years.
The #DoomLoop has begun. 1 USD = 1 EUR. Prepare yourselves for YCC and $BTC = $1 million. But please be patient, these things take time. pic.twitter.com/mR8SsBx0fv
— Arthur Hayes (@CryptoHayes) July 11, 2022
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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