Bitcoin and stocks direction uncertain because of possible US recession

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Last Updated on 6 November 2023 by CryptoTips.eu

Bitcoin price forecasters are at a loss for words. Even the AI model that in the first quarter was hyper-bullish about the possible growth of the largest digital coin this year has now adjusted its forecast. Everything, including worldwide stock markets, depends on the answer to the following question: is there a US recession coming or not?

The rather aggressive way in which the US central bank, the Federal Reserve, has raised interest rates to a level of 5.25% has caused inflation to fall, but the US unemployment rate remains quite low. The problem is that the inflation rate is still higher than the level that Jay Powell, Fed Chairman, would like.

An additional problem is that more and more banks in the United States are getting into trouble because of the high interest rates. Three midsized American banks have tumbled and another one in the coming week seems likely.

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Bitcoin better than stock indexes

Meanwhile, the largest and best-known digital currency, Bitcoin, is up about 65% this year. That is far better than the S&P 500, which is up about 7%. Even the technology exchange Nasdaq has only yielded a quarter of Bitcoin’s profits so far.

Analysts claim that Bitcoin has benefited from the various crises in the crypto arena. The turmoil has pushed investors away from lesser-known coins and toward the industry’s most recognized name.

Callie Cox, an analyst at the investment company eToro who tracks cryptocurrencies, said that:

Bitcoin has been the beneficiary of a flight to quality within the crypto industry. This is the crypto name that my mom and your family probably know.

But the rest of the year looks uncertain, both for crypto and stocks, until that recession question gets answered.

Since March 2023, three of the 30 largest banks in the United States have failed. Shares of regional lender PacWest Bancorp plunged again this week after the bank said it lost 9% of its deposits, suggesting continued financial instability.

Doubt

In Europe, the problem has remained limited to Credit Suisse, which was taken over by that other major Swiss bank, UBS. However, here too the unrest is growing for classic banking.

When the banking system was threatened, many investors saw reason to doubt the financial system, says eToro’s Cox. They started looking for alternatives.

Little data is available that depositors took money out of banks and put it into Bitcoin, but some analysts admitted to hearing anecdotes from bank customers who did indeed transfer money to crypto.

If the Fed halts its rate hikes, as many investors expect, Bitcoin could continue to rise in the second half of the year, experts agree. However, they warned that a potential US recession could bring volatility, both for crypto and stocks.

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Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
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