by Aima Raza
Wall Street market analysts now predict an approaching recession which affects the prices of Bitcoin and its counterpart cryptocurrencies. The rising odds of a recession from Wall Street analysts will push Bitcoin and other cryptocurrencies down in value like Shiba Inu, Dogecoin, Ripple, and Cardano.
PIMCO and JPMorgan economists believe there is a 35% and 40% chance of an U.S. recession happening. Goldman Sachs believes there is a 20% chance of economic decline according to their recent forecast. According to Mark Zandi of Moody’s the chances of an upcoming economic downturn stand at 35%.
These forecasts come because consumers trust the economy less, the government reduces its spending, and conflicts continue surrounding Donald Trump’s trade policies. Economists consider a recession as two straight periods when GDP shows negative results. According to the Atlanta Federal Reserve the United States economy will reduce 2.4% in quarter one which makes market participants worry about economic weakness.
Fed Actions Boost Bitcoin
When the economy experiences a downturn it creates many unfavorable conditions through elevated joblessness, reduced output and diminished faith in the market. Under recessionary scenarios Bitcoin and alternative cryptocurrencies tend to thrive when the Federal Reserve intervenes through monetary action.
When the economy struggles the Fed will lower borrowing costs and expand its monetary base through QE. During QE programs the Federal Reserve buys government bonds and mortgage-backed securities which often benefits risky assets including cryptocurrency and stock markets.
Historical trends support this expectation. Stock prices dropped hard in 2008-2009 before rising again because of government and Federal Reserve support actions. Upon the COVID-19 outbreak Bitcoin slumped yet headed for an extensive growth upswing during 2021.
The market has strengthened its belief in more rate reductions after the U.S. economy announced lower inflation data on Wednesday in its February report. The United States dollar index and bond yields drop as Federal Reserve officials prepare to offer more financial support.
Bitcoin Eyes Policy Shifts
The upcoming economic slowdown directly correlates with large decreases in the values of alternative coins. Both Shiba Inu and other altcoins like Dogecoin, Ripple, and Cardano declined more than half of their 2024 peak value.
Current market trends support crypto price increases from both Fed rate cuts and market-oriented factors. Donald Trump aims to establish the Strategic Bitcoin Reserve and buy Bitcoin backed by American assets. The SEC stopped pursuing cryptocurrency cases and will let trading of altcoin ETFs start during 2022.
The growing market liquidity and relaxed regulatory concerns will boost Bitcoin and alternative cryptocurrencies while economic issues persist.
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