Economic indicators show that the US economy is rapidly heading towards a recession. Experts argue that the entry of the US economy into a recession will push people in search of safe havens towards Bitcoin (BTC) and altcoins, positively impacting the cryptocurrency market. The p...
Economic indicators show that the US economy is rapidly heading towards a recession. Experts argue that the entry of the US economy into a recession will push people in search of safe havens towards Bitcoin (BTC) and altcoins, positively impacting the cryptocurrency market. Macro economist Hugh Hendry revealed that in the event of a recession, he would prefer Bitcoin over gold, indicating his trust in the largest cryptocurrency.
The US Economy Raises Alarm
The US economy is going through tough times, and a new challenge has emerged. According to Reuters, the Leading Economic Index, an indicator used to monitor labor market transformations in the US, has fallen for the 15th consecutive month due to weakening consumer sentiment and increasing unemployment claims. This marks the longest decline series since the period before the recession of 2007-2009.
Amid concerns surrounding the US economy, the US Conference Board reported that the index, which is a prediction of future economic activity, exceeded expectations by dropping 0.7% in June following a 0.6% decline in May. Economists were expecting a 0.6% decrease in the index.
Justyna Zabinska-La Monica, Senior Director of the Business Cycle Indicators unit at the US Conference Board, interpreted the data and stated that economic activities will continue to slow down in the coming months.
Cryptocurrencies in a Recession Scenario
Some experts claim that due to increasing concerns about the US economy entering a recession, people are seeking refuge in Bitcoin and altcoins. Macro economist Hugh Hendry expressed his preference for Bitcoin over gold as a safe haven during a recession, emphasizing the potential of cryptocurrencies to provide protection during economic downturns.
However, not everyone in the industry shares Hendry’s optimism regarding cryptocurrencies as safe havens. Many investors argue that cryptocurrencies will not be the assets to protect them from a potential recession storm. Some experts do not consider cryptocurrencies as safe havens due to their inherent high volatility. Scott Sheridan, CEO of online brokerage firm Tastytrade, expressed doubts about the safe haven status of cryptocurrencies during economic uncertainty.
As the Federal Reserve began raising interest rates since March 2022, people quickly fled from major cryptocurrencies such as Bitcoin and Ethereum. BTC and most altcoins experienced declines of over 70% and even 90% from their all-time highs. Almost all cryptocurrencies are still trading below their recent peak levels, but there has been a resurgence in the cryptocurrency market since the beginning of the year. Investors have turned to risky assets like cryptocurrencies, expecting the end of the Federal Reserve’s interest rate hike cycle.