A survey by Allianz Life reveals that 6 out of 10 Americans feel that a recession is just around the corner. In the first quarter of 2022, US inflation was at one of its highest points in the last 40 years.
The Wall Street Crash and the collapse of the banking system caused the Great Depression in the US in 1929. That crisis cost billions of US dollars to the country, and citizens fell into poverty. In addition, the Great Recession beginning in 2008 gave rise to Bitcoin, left many Americans bankrupt, and generated insecurity in the real estate market.
Those two historical events changed the lives of Americans and had an impact on the world economy. For that reason, it is understandable that the words inflation, unemployment, crisis, and recession inspire terror in the population. A survey by the firm Allianz Life reveals that 6 out of 10 US citizens currently feel that fear.
The term recession means that the economy has suffered a decline in the gross domestic product (GDP) for two consecutive quarters. In the first three months of 2022, the US economy registered one of the highest inflations in the last 40 years.
Reports from the Product Management Institute (ISM) confirm that the situation can worsen. For example, mortgage rates, which refer to the price of housing in the US, have soared to all-time levels.
Businesses grow more slowly while demand for products falls because the US Federal Reserve (FED) has increased interest rates to 0.5%. Those situations could cause stagflation, a process by which inflation accelerates, unemployment rates rise, and the economy stagnates.
How the Recession in the US Could Affect Bitcoin
Those that follow the price of Bitcoin wonder what the US economy has to do with it. Surprisingly, the value of the cryptocurrency reacts along with the measures by the US FED and the behavior of the Wall Street stock market.
Since early 2022, investors have seen Bitcoin as a risky asset more than anything else. They consider it a highly speculative investment, comparing it with popular stocks on US stock markets like those of technology companies. The price of Google, Apple, and Telsa has moved sharply similarly to Bitcoin, showing the high correlation between both markets.
That makes sense when considering that leading institutional investors in Bitcoin like MicroStrategy, Block and Tesla are companies listed on US stock exchanges. In other words, much of the capital helping BTC climb to new price levels comes from firms that rely heavily on the US economy.
In addition, the ban on Bitcoin in China led a significant number of miners to move to the US territory. Regulations have begun to have growing relevance in the price of BTC since its shares of power in the market have increased.
Given that situation, it would not be surprising that the current US economic situation affects the Bitcoin market. If loans become increasingly expensive, fewer people will want to borrow money to produce returns in the stock markets, including cryptocurrencies. In times of crisis, many investors prefer store-of-value assets instead of risking capital.
For Bitcoin to move away from a financial crisis in the US, its narrative as a store-of-value asset should take hold. The community supports that perspective by considering that the currency has the potential to increase its value in the long term.
By Alexander Salazar
