Can Bitcoin Survive the Next Recession? (2024)

FAQs

Will bitcoin survive a recession? ›

According to Kates, bitcoin is a risk-on asset and, when the market “rips on bullish sentiment,” bitcoin goes with it. Meanwhile, he added that the opposite is also true. “In the case of a real recession where credit is tight, job losses are above average and money is tight, bitcoin will not shine,” he said.

Many of the factors that affect stock prices also affect cryptocurrency prices. Investors and traders treat cryptocurrency the same way they treat stocks, so prices tend to trend the same.

The S&P 500 rallied in the first half of 2024 as investors cheered resilient earnings growth and anticipated that aggressive Fed rate cuts were just around the corner. However, the New York Fed's recession probability model suggests there is still a 61.8% chance of a U.S. recession sometime in the next 12 months.

It is often called the silver to Bitcoin's gold. Litecoin has a correlation of 0.87 based on a 60-day rolling correlation. Therefore, the price of Litecoin often moves in sync with the price of Bitcoin.

Yes, crypto still has potential in the future, even when questions like "Will crypto recover?" are buzzing around. Despite its volatility, the technology behind cryptocurrencies, like blockchain, holds significant prospects.

Cathie Wood, Ark Invest Management's CEO and Chief Investment Officer, has set the financial world abuzz with her bullish Bitcoin (BTC) forecast. Wood boldly predicted that BTC could surge 5,837%, reaching a price of $3.8 million per coin, by 2030.

The Federal Deposit Insurance Corporation also oversees bank operations and insures depositor's' money to prevent bank runs that became an iconic image in the 1930s. While a drop like 1929 could potentially happen again, it wouldn't have the same the consequences today as it did 90 years ago.

According to the National Bureau of Economic Research (NBER), the average length of recessions since World War II has been approximately 11 months. But the exact length of a recession is difficult to predict. In general, a recession lasts anywhere from six to 18 months.

After global growth exceeded expectations in 2023, businesses' perceived probability of a global recession has fallen substantially in 2024, according to Oxford Economics data. Oxford's global risk survey in January showed a recession probability of 7.2% — less than half of what it was in October 2023.

"Bitcoin has plummeted to around $53,000, marking a significant decline, while Ether has also turned negative for 2024, reflecting broader concerns in the crypto sector. This downturn is driven by regulatory pressures, adverse macroeconomic factors like weak US job data, and the Japanese stock market crash.

What goes up when Bitcoin goes down? ›

The chart below shows bitcoin's market size as a percentage of the broader crypto market – a.k.a. bitcoin dominance (BTC. D on TradingView). When the ratio is trending down, that means altcoins (i.e. crypto investments other than bitcoin) are mostly going up in value versus bitcoin.

The most important thing to remember about Bitcoin is that it is a high-risk asset. Never invest money that you aren't willing to lose. Treat Bitcoin as a means of slowly growing your existing wealth rather than an all-or-nothing gamble. As with other investments, it's important to hedge your portfolio.

However Bitcoin evolves, no new bitcoins will be released after the limit of 21 million coins is reached. This supply limit is likely to have the most significant impact on Bitcoin miners, but it's possible that Bitcoin investors could also experience adverse effects.

The traditional narrative stands in the line that Bitcoin will become more stable when its user base increases and it becomes more utilized in transactions. However, the past dynamics does not suggest that its volatility is in a downward trend (Baur and Dimpfl, 2021).

Due to its reputation for being a safe-haven asset, gold tends to perform well during a recession. For example, when the stock market collapsed in 2007, investment demand for gold spiked and continued to rise, and gold doubled in value between 2007 and 2011.

Bitcoin prices remain volatile throughout the week and weekend, but the volatility is somewhat reliable in that it is always present. There is less trading volume on the weekends, reducing liquidity. The significant drop in volume is likely from professional traders, who cease trading on weekends.