According to a report by The Block, concerns about a U.S. economic recession and geopolitical uncertainty have shaken global markets, prompting analysts to conduct an in-depth analysis of the potential economic downturn this year and its impact on Bitcoin and other cryptocurrencies. Analysts from the cryptocurrency exchange Bitfinex stated, “Given the current economic indicators and recent actions by central banks around the world, concerns about a global economic recession are indeed warranted.”
They pointed out that in the past three months, central banks worldwide have implemented a total of 35 interest rate cuts, surpassing the forecasted cuts for early 2024. This proactive easing policy is reminiscent of the peak period of the 2009 financial crisis. Although global inflation levels are expected to ease this year, economic growth forecasts remain weak. The International Monetary Fund (IMF) predicts that the global economic growth rate will slightly decline from 3% to 2.9% in 2024. At the same time, persistent inflationary pressures have compelled central banks to take action to stimulate the economy and avoid further recession.
The Bitfinex analysts also noted that a large amount of speculative-grade debt maturing in the U.S. in 2024, along with declining bond yields, indicates stress in the financial environment. Investors are turning to safer assets, and the drop in yields are typical indicators of an economic recession, reflecting a lack of confidence in sustained economic growth.
Aurelie Barthere, Chief Research Analyst at the on-chain analysis platform Nansen, also believes these concerns are justified. She pointed out that economic growth in the Eurozone has remained weak since the energy shock triggered by the Ukraine war in 2022, compounded by the threat of potential tariff increases in the U.S. and the bursting of the real estate bubble in China, making the global economic outlook even bleaker.
Aurelie Barthere stated that U.S. economic growth is also slowing, although there are no clear areas of weakness at present aside from overvaluation in the stock market. She forecasts a 40% probability of an economic recession in the second half of 2024, significantly higher than the historical average of 17%.
In the context of a potential economic recession, Bitfinex analysts believe that Bitcoin may benefit from its status as a safe-haven asset. Typically, during periods of economic uncertainty, investors flock to assets perceived as stores of value, which may increase the demand for Bitcoin as “digital gold.” However, analysts adopt a more cautious stance regarding the broader cryptocurrency market, particularly higher-risk altcoins. They warn that reduced market liquidity and lower risk appetite could lead to a decline in the value of these assets.
Valentin Fournier, an analyst at digital asset research firm BRN, stated that although Bitcoin has shown some rebound pressure after a significant drop earlier this week, the market still requires stronger catalysts to sustain this positive trend. He noted that initial jobless claims and the upcoming Consumer Price Index (CPI) data will be important indicators to observe the state of the U.S. economy, which will determine whether the Federal Reserve has more room to avoid an economic hard landing.
Additionally, Fournier mentioned that potential interest rate cuts in the medium term, the results of the U.S. elections, and the possibility of a national Bitcoin reserve if Donald Trump wins, are all potential catalysts in the coming months
