1. Home
  2. Live Market Analysis
  3. How Would Bitcoin React to a Recession?
How Would Bitcoin React to a Recession?
20.06.2022

This morning, the price of bitcoin has been specifically interesting for the market. The price had originally declined by 3.14% but has since gained momentum and corrected upwards, currently, the price of bitcoin is 1.75% higher than its market open. Despite small wins here and there, the price charts make it clear that the cryptocurrency has struggled this year and sellers have control of the market. So, what has been keeping the crypto prices on the lower end these past few months?

The main factor of pressure on the cryptocurrency sector is still the sharp tightening of the monetary policy of the Central Bank, which has resulted in investors fearing their cost of living will rise. As a result, some investors are abandoning risky assets, including shares of technology companies, properties, and cryptocurrencies. Instead, they prefer to keep additional wealth in cash.

BITCOIN - 20.06.2022 - 1.jpg

In addition to this, this past weekend saw further predictions from main market players regarding a “small recession” towards the end of the year and a possible sharper decline in 2023. According to analysts at Nomura Holdings, which is a well-known international market player, the US economy is likely to fall into a small recession by the end of 2022 as the Federal Reserve raises rates and supply disruptions continue. Similar predictions have also been released over the weekend from other investment banks and hedge funds.

So, the question that many are asking is how the cryptocurrency market is likely to react to a recession? Well, if we base it on the past two months, then the answer is; not great. However, having said that, it’s important to note that it isn't just the cryptocurrency sector that has dwindled recently.

Stocks focused on the digital sector, such as MicroStrategy, Coinbase, Silvergate Capital, and others have also been subject to negative impact. MicroStrategy’s losses stand at roughly $1 billion as a result of poor market performance. Last week, it also became known that the cryptocurrency hedge fund, Three Arrows Capital, is exploring the possibility of selling its assets, and the Asian-focused crypto lender Babel Finance announced the suspension of work.

Last but not least, traders have also noticed a correlation between the stock and the cryptocurrency markets. Currently, on a daily basis, the correlation is quite weak, however, over the longer term, the correlation has scored high. This is because both categories are linked with the market’s risk appetite, which is currently low.

BITCOIN - 20.06.2022 - 2.jpg

The price movements of bitcoin this morning have slightly slowed when compared to its price movements over the past week. This indicates that traders may be awaiting confirmation from the Fed regarding future plans, as well as the UK’s and Canada’s inflation releases.

Bitcoin’s latest price movement remains downwards both in the short and longer-term. The price has found resistance at the $20,900 mark.

IMPORTANT NOTICE: Any news, opinions, research, analyses, prices or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.
RISK WARNING: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. A high percentage of retail client investors lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Copyright © 2022 – All rights reserved.

NAGA is a trademark of The NAGA Group AG, a German based FinTech company publicly listed on the Frankfurt Stock Exchange | WKN: A161NR | ISIN: DE000A161NR7.

Any trademarks appearing on this website are the property of their respective owners.

The NAGA Group AG is the holding company of various companies, such as NAGA GLOBAL LLC, NAGA MARKETS EUROPE LTD, NAGA Technology GmbH, NAGA Pay GmbH and has a close link with NAGAX Europe OÜ.

RISK WARNING: Derivatives are complex instruments and come with a high risk of losing money rapidly due to leverage. A high percentage of retail investor accounts lose money when trading derivatives with this provider. You should consider whether you understand how derivatives work and whether you can afford to take the high risk of losing your money.

Trading with NAGA Trader by following and/or copying or replicating the trades of other traders involves high levels of risks, even when following and/or copying or replicating the top-performing traders. Such risks include the risk that you may be following/copying the trading decisions of possibly inexperienced/unprofessional traders, or traders whose ultimate purpose or intention, or financial status may differ from yours. Before making an investment decision, you should rely on your own assessment of the person making the trading decisions and the terms of all the legal documentation.

Restricted countries: NAGA Group AG does not provide services for the residents of certain countries, such as Afghanistan, Albania, American Samoa, Australia, Barbados, Belgium, British Virgin Islands, Burkina Faso, Cambodia, Canada (including Quebec), Cayman Islands, Central African Republic, Congo, Democratic People's Republic of Korea, Democratic Republic of the Congo, Gibraltar, Guam, Haiti, Iran, Iraq, Isle of Man, Israel, Jamaica, Jordan, Libyan Arab Jamahiriya, Mali, Monaco, Morocco, Myanmar, Nicaragua, Philippines, Russian Federation, San Marino, Senegal, Serbia, Somalia, South Sudan, Sri Lanka, Syrian Arab Republic, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, US Minor Islands, US Virgin Islands, USA, Vanuatu, Yemen, Zimbabwe.

Member of NAGA Group AG that is publicly listed in Frankfurt Stock Exchange.
close icon
By using this website, you agree to our cookie policy