Economic Recession Probability Reaches 40 in the Second Half Analyst Bitcoin to Play a Hedge Role but Altcoins May Suffer

Economic Recession Probability Reaches 40 in the Second Half Analyst Bitcoin to Play a Hedge Role but Altcoins May Suffer

Economic Recession Probability Reaches 40 in the Second Half Analyst Bitcoin to Play a Hedge Role but Altcoins May Suffer

According to a report by The Block, concerns over a potential economic recession in the United States and geopolitical uncertainties have shaken global markets, prompting analysts to conduct in-depth analyses of the possible economic downturn this year and its impact on Bitcoin and other cryptocurrencies.

Analysts from the cryptocurrency exchange Bitfinex stated, “Given the current economic indicators and recent actions by various central banks, concerns about a global economic recession are indeed justified.” They noted that in the past three months, central banks around the world have implemented a total of 35 interest rate cuts, surpassing the anticipated cuts for early 2024. This proactive easing policy is reminiscent of the peak period of the 2009 financial crisis.

Despite expectations for a slight easing of global inflation levels this year, economic growth forecasts remain weak. The International Monetary Fund (IMF) predicts that the global economic growth rate will decline slightly from 3% to 2.9% in 2024. Meanwhile, persistent inflationary pressures have compelled central banks to take action to stimulate the economy and avoid further recession.

Bitfinex analysts also pointed out that the substantial amount of speculative-grade debt maturing in the United States in 2024, along with declining bond yields, indicates stress in the financial environment. The shift of investors toward safer assets and the drop in yields are typical indicators of an economic recession, reflecting a lack of confidence in sustained economic growth.

Aurelie Barthere, Chief Research Analyst at the on-chain analysis platform Nansen, also believes these concerns are warranted. She noted that since the energy shock triggered by the Ukraine war in 2022, economic growth in the Eurozone has been sluggish, compounded by the threat of potential tariff increases in the U.S. and the bursting of China’s real estate bubble, making the global economic outlook even more bleak.

Aurelie Barthere stated that economic growth in the United States is also slowing, although there are currently no obvious areas of vulnerability aside from high stock market valuations. She predicts a 40% probability of a recession in the second half of 2024, significantly higher than the historical average of 17%.

In the context of a potential recession, Bitfinex analysts believe that Bitcoin may benefit from its status as a safe-haven asset. Typically, during periods of economic uncertainty, investors flock to assets perceived as stores of value, potentially increasing demand for Bitcoin as “digital gold.” However, analysts express a more cautious stance regarding the broader cryptocurrency market, especially for higher-risk altcoins. They warn that reduced market liquidity and lower risk appetite could lead to declines in the value of these assets.

Valentin Fournier, an analyst at the digital asset research firm BRN, stated that although Bitcoin has shown some rebound pressure after a significant drop earlier this week, the market still requires stronger catalysts to sustain this positive trend. He pointed out that initial jobless claims and the upcoming consumer price index (CPI) data will be important indicators of the U.S. economic situation, determining whether the Federal Reserve has more room to avoid an economic hard landing.

Furthermore, Fournier mentioned that potential interest rate cuts in the medium term, the results of the U.S. elections, and the possible establishment of a national Bitcoin reserve if Donald Trump were to win, are all potential catalysts for the coming months.