According to Mike McGlone, Senior Macro Strategist at Bloomberg, the cryptocurrency sector may be entering its first recession. McGlone says the development would mean “lower asset prices and higher volatility.” Furthermore, the Bloomberg strategist highlighted that the birth of Bitcoin (BTC) was propelled by “the last significant US economic contraction.” He added that the coming economic reset might lead to additional such endeavors.
McGlone’s remarks follow the recent fall in cryptocurrency prices. After climbing to $24,000, Bitcoin (BTC) has fallen to $22,800. At press time, BTC was down by 2.3% in 24 hours and 4% in the last seven days.
Moreover, according to CoinGlass, BTC’s volatility has been steadily increasing since January 2023. BTC’s volatility sharply fell at the beginning of December last year. However, the trend took a turn after the cryptocurrency market picked up steam, and BTC prices began to move up.
Will cryptocurrency fall into a recession?
According to IMF (International Monetary Fund) managing director Kristalina Georgieva, the U.S. economy will slow down this year, but a soft landing is feasible. Georgieva stated,
“…based on the data we have today, we think U.S. would be able to go through the year narrowly avoiding falling into recession.”
On the other hand, the unemployment rate in the U.S. decreased to 3.4%, the lowest since 1969. According to President Joe Biden, the employment data proves that his economic strategy works.
The U.S. Dollar continued to hold firm against the Euro as markets opened on Monday.
Furthermore, inflation in the U.S. has steadily decreased over the past few months, although the number is still above the Federal Reserve’s 2% target. The decreasing CPI (consumer price index) number has led to a cooling of interest rate hikes from the FED, which has consequently positively impacted the cryptocurrency space.
Hence, following the trend, the U.S. might escape a recession. However, a slow economy might mean fewer funds for risky assets such as cryptocurrencies and other digital assets. Nonetheless, as pointed out by McGlone, a slower economy might lead to innovation in the finance sector, which could lead to other investment opportunities.