Can Bitcoin Survive the First Global Economic Crisis?

Bitcoin was launched as a response to the 2008 global financial crisis. It has never experienced a complete recession since then. Bitcoin (BTC) was a response to the 2008 global recession. It introduced a new way of transacting without relying on the trust of third parties such as banks, especially bankrupt banks that were bailed out by the government at public expense. Satoshi Nakamoto made a statement in 2009. The central bank must be trusted not to devalue the currency, but the history of fiat currencies is full of violations of this trust. With this sentence, the main purpose of Bitcoin has been conveyed.

However, even though Bitcoin has not affected mining blocks and has attracted investors looking for gold-like features, it has experienced a decrease of about 75 percent from the $ 69,000 level in November 2021, as we reported on cryptokoin.com. This shows that it has no resilience against global economic forces. Simultaneously, the entire crypto market lost $2.25 trillion over the same period. In addition, this points to large-scale demand destruction in the sector. Bitcoin’s collapse came in a time of rising inflation and the high reaction of global central banks to it. In particular, the FED made moves to curb the inflation, which reached 8.4 percent in May. However, it increased interest rates by 75 basis points on 15 June.

There will be more rate hikes!

Fed Chairman Jerome Powell stated in his congressional statement that interest rate hikes will continue to reduce inflation. The pace of these changes will continue to depend on incoming data and the evolving outlook for the economy, he said. The statement comes after a Reuters poll of economists who agreed that the Fed will raise benchmark rates by another 75 basis points in July, followed by a 0.5 percent gain in September.

Given the central bank’s 2 percent inflation target, a U-turn in hawk policies seems unlikely in the near term. Interestingly, the gap between the Fed’s funds rates and the consumer price index (CPI) is currently at a record high.

Fed Reserve

Bitcoin faces recession for the first time!

A survey was conducted with 49 participants. About 70 percent of economists expect a recessionary period. He believes that the US economy will enter a long period of recession next year due to its hawkish policy. To summarize, a country’s economy is faced with negative gross domestic product (GDP). Rising unemployment levels coupled with declining sales and prolonged low manufacturing output enters a recession. Forecasts run the risk of putting Bitcoin ahead of a full-blown economic crisis. In addition, Bitcoin could not act as a safe haven during the rising inflation period. It increases the probability that it will continue to decline along with Wall Street indices, especially technology stocks.

Meanwhile, the collapse of Terra, a $40 billion algorithmic stablecoin project, has dampened demand. It also hurt crypto demand, causing bankruptcy issues at major crypto hedge fund Three Arrow Capital. For example, Ethereum, the second largest cryptocurrency after Bitcoin, fell more than 80 percent during the bear cycle. This dropped ETH to $880. Similarly, altcoins have experienced a decline. Some of these are Cardano (ADA), Solana (SOL), and Avalanche (AVAX) altcoins. Top digital assets have experienced a decline of between 85 percent and 90 percent from their 2021 peaks.

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Larry Brown

I graduated from Yale University, Department of Television. I have been a professional news writer for 3 years. I am continuing my career here by establishing amknews.com site 3 months ago.