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How is the recession affecting bitcoin?

 


How has the Bitcoin course developed in recent months?

In the last 9 months, the Bitcoin price has fallen continuously. In November 2021, the Bitcoin price reached its all-time high. Since the beginning of the month, we have seen the Bitcoin price fall and the beginning of the bear market. By the turn of the year, the BTC had already lost around 30 percent of its value. 


After the turn of the year, the Bitcoin price continued to fall. BTC was only able to stabilize again in March and April. However, May and June failed to hold support at $35,000 and $30,000, respectively. In June we saw the one dip below $20,000.


How did financial markets affect bitcoin?

In the last 2 years, the influence of the classic financial markets has increased significantly. Because more and more institutional investors got into BTC during this time. Furthermore, more and more cryptocurrency financial products such as Bitcoin Futures or ETFs were created . Therefore, the influence of the financial markets on the Bitcoin price increased.


In the past, the crypto market was largely independent of the prices on the classic financial markets. But in 2022, the impact will be much greater. In the recent past, we often saw a correlation between the prices of tech stocks on the NASDAQ and the price of Bitcoin.

The USA and the countries of the European Union are currently in the grip of high inflation. This could be a sign of an economic recession. The economy only recovered last year after the damage caused by the corona pandemic. But there are many signs that we are headed for a recession at least as severe as 2020.


The high consumer and energy prices make for a poor investment climate. The economy is still carrying some legacy burdens from the 2008 crisis. In the United States, the FED recently raised key interest rates sharply by 0.5 percent. This caused massive losses in the Bitcoin course.


How does a reaction affect bitcoin?

There have already been two key factors impacting Bitcoin price in the current economic climate. These are interest rate hikes coupled with aggressive rhetoric and falling tech stocks. Both factors could continue to play a role in a recession.


However, there could also be a decoupling. The current Bitcoin price is now probably adjusted to the increased interest rates. Furthermore, the BTC is a finite commodity, which becomes more and more difficult to “manufacture” (mining) over time. Therefore, according to some analysts, BTC could also decouple from stock prices. Ultimately, BTC is a store of value.


Can I get through the recession with BTC?

At the moment, the price of bitcoin is extremely low due to the bear market. Based on the experience of the last BTC cycles, this bear market should continue for a few more months. But in a recession, Bitcoin could come back into focus in its role as a store of value. If BTC decouples from financial markets again, it could emerge as a riskier alternative to gold.

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