Will Bitcoin Tank If A Recession Hits, IMF Issues Warning

As the prices of Bitcoin, and other crypto assets continue to drop, there have been signs that the cryptocurrency market is in decline. Global economic tightening is occurring due to increased interest rates at most central banks around the world. It is a devastating effect on traditional as well as crypto markets.

The International Monetary Fund (IMF), which was a warning about possible economic collapse, issued a statement following the events. The IMF also warned of worsening global recessions in 2023. Financial markets are likely to be more risky, causing extreme fear.

There could also be a dramatic decline in crypto-assets and traditional stocks prices.

BTC Prices Correlate With Stocks

For more than a decade, Bitcoin’s price has been strongly correlated with the equity markets. In most cases, this is the case with BTC as well as stocks. The correlation can be explained by many factors. One of the stocks with a solid link to Bitcoin is S&P 500.

Bitcoin saw a drop in price during the global pandemic recession of 2020. The same happened for equity stock. The system transited as positive economic conditions improved. In December 2021, and May 2022 respectively, equity and crypto markets fell.

Many of the trends that are correlated could be indicative of how markets for securities perform after they have reached a threshold of liquidity. It could also indicate that an institutional fund has received a significant amount of capital inflows.

Although the economic factors are declining, Bitcoin’s price could still be held steady and high. However, the primary crypto asset could meet a drastic fall once there’s a global recession. Investors may be forced out of their investments by massive sales.

BTC may offer long-term bullish outlook

If there is favorable intervention, Bitcoin prices will increase. The US Federal Reserve, along with other global central banks could heed the warnings of the IMF and reduce rates in order to stem the recession. A situation like this will lead to a rise in Bitcoin and other crypto assets’ prices. Equity stocks will also be encouraged.

There is still hope, even with the intervention by the central banks. The crypto market will be affected by a downturn, which could lead to a drop in the value of bitcoin. Investors of crypto assets could find this a more appealing entry point.

Remember that Bitcoin was not prominently featured in the 2008 recession. After its March 2020 collapse, Bitcoin experienced a huge bull market which boosted its position in the cryptocurrency market. Since then Bitcoin has been rising above the stock market and has maintained its position.

Bitcoin’s overall outlook is bullish for the long term due to its outplay. As of press time, Bitcoin’s price hovers around $19 029.79. That is a drop in value of approximately 1.07% over 24 hours.

Will Bitcoin Tank If A Recession Hits, IMF Issues Warning
Bitcoin price rises to above $19,000 in Tradingview.com
Featured Image from Pixabay. Charts from TradingView.com

Get more Crypto News at CFX Magazine