We continue to think the US will not fall into recession the minute the new year clock strikes one, but the sentiment is growing by leaps and bounds that 2019 is going to be awful for the US–economy unless something comes along to reverse the trend–and recession is well-night certain for 2020
These are the words of Barbara Rockefeller, the renowned economist, forex trading expert and best-selling financial author. In her op-ed on FX-Street, Rockefeller looked at the many factors that point to a weakening of the global economy to the point of a financial crisis. They include the ensuing U.S-China trade war, the instability facing Britain over Brexit, political instability in France and Italy and more.
Rockefeller isn’t alone in her prediction of a recession. Morgan Staley equity chief Michael Wilson believes that a recession could happen next year. The world’s largest asset manager BlackRock also believes that there will be a recession before 2021.
The question is, therefore, can Bitcoin capitalize on the recession or will it be a victim as well?
Why Bitcoin Could Go down as Well
It’s easy to assume that as the fiat currencies face their demise, Bitcoin will be the default winner. After all, Bitcoin was launched on the back of the 2008 financial crisis. During a recession, people lose confidence in the established financial system. They then turn to alternative measures, with Bitcoin being one.
However, Bitcoin’s volatility could be the thorn in its flesh. During uncertain times when no one knows what the next day brings, people are desperate for stability. Currently, Bitcoin hasn’t presented itself in the best light in this regard. It has fallen from $20,000 in less than a year to trade at $3,400, an 82 percent drop.
Granted, most markets have seen major losses this year. Banks have experienced slow growth, with Morgan Stanley revealing that this year has seen the slowest growth since 2008. And as reported by CNBC, bank stocks crashed to 52 -week low last week. This was the same week that Bitcoin hit a 14-month low.
According to one analyst, Bitcoin will collapse in the case of a recession. During periods of unrest, investors tend to migrate towards the least risky assets. Bitcoin could be worth a million dollars in a year, but it could also be worth zero. Peter Stephens, an analyst with The Motley Fool wrote recently:
Given that investors usually focus on lower-risk assets during periods of financial strain, it seems unlikely that they will seek to buy an asset which seems to be impossible to value and that could be worth next to nothing in a number of months.
While not everyone may agree with Stephens, his insight is quite well-founded. Investors, and especially the seasoned ones tend to hedge against risks when the market is under strain.
There Still Lies Great Opportunity
In great distress lies a great opportunity for the cryptocurrency market. To begin with, this is exactly what Satoshi Nakamoto developed and launched Bitcoin for. In the Bitcoin genesis block, he embedded the Times newspaper title on banks bailout and how the legacy financial system had collapsed.
Bitcoin was launched to give the people power over the currency they use. While currently price speculations dominate the industry, the financial crisis could finally bing in mass adoption of cryptos. There are no guarantees that Bitcoin will be a stable store of value. However, it’s more likely to perform better than the traditional assets and could become ten times as popular as it is now.