Can Bitcoin survive its first global economic crisis?

Bitcoin (BTC) was in response to the 2008 global downturn. He introduced a new way of doing business, based on the beliefs of third parties, such as banks, especially bankrupt banks.

Satoshi Nakamoto In 2009, “the central bank must be trusted not to devalue the currency, but the history of the currency is full of violations.

The Bitcoin Genesis block summarizes the idea in the following message.

The Times 03 January 2009 The Chancellor is on the verge of a second bank subsidy.

But while Bitcoin remains unsolved and its gold-looking assets attract “digital gold” investors, the current 75% drop from $ 69,000 in November 2021 indicates that the world economy is not free.

At the same time, the total crypto market lost $ 2.25 trillion in the same period, indicating a sharp drop in demand in the industry.

Bitcoin’s fall was due to rising inflation and the response of the World Bank. In particular, the Federal Reserve raised benchmark benchmarks by 75 points (bps) on June 15 to curb inflation that reached 8.4 percent in May.

BTC / USD Daily Chart. Source: TradingView

In addition, the crash made the BTC more comparable to the performance of the tech-heavy Nasdaq composite. Between November 2021 and June 2022, the US stock market index fell more than 30 percent.

Further inflation in the future

The chairman of the federation, Jerome Paul, told Congressman that inflation would continue to fall, although “the pace of those changes will depend on the information coming in and the outlook for economic growth.”

The announcement follows a report by Reuters economists that the federation agreed in July to increase benchmark rates by another 75 bps and a 0.5% increase in September.

This will further negatively impact the already declining crypto market, says London-based Financial Intelligence, a financial services firm that will not reduce its impact unless the federation reduces its “aggressive approach to monetary policy.”

However, with the central bank’s target of 2% inflation, it seems unlikely that reversal of falconry policies will happen in the near future. Interestingly, the difference between the Federal Fund rates and the Consumer Price Index (CPI) is much larger than it is now.

The size of the federation compared to inflation. Source Econom Economics

Bitcoin is facing its first potential economic downturn

According to a survey of 49 respondents in the Financial Times, about 70% of economists believe that the US economy could collapse next year due to the Hawkish Federation.

In summary, when a country’s economy suffers from GDP, it is in the throes of rising unemployment, declining retail sales, and long-term declining productivity.

In particular, 38% expect the recession to begin in the first half of 2023, while 30% expect it to remain the same in the Q3-Q4 period. Moreover, a separate study by Bloomberg in May shows a 30% economic downturn next year.

The next US collapse begins in 2023. Source: Financial Financial Times

In a press statement issued on June 22, Paul stated that “the economic downturn is a certainty.”

The forecasts pose a risk for Bitcoin ahead of the financial crisis. And in the face of rising inflation, the fact that it does not behave as a secure asset increases its chances of declining with Wall Street Index, mainly technology stocks.

Meanwhile, the collapse of Terra, a $ 40-billion “algorithmic stablecoin” project, and three archery capital, leading to bankruptcy issues, the largest crypto hedge fund, also destroyed interest across the crypto sector.

For example, Ether, the second largest cryptocurrency after Bitcoin, dropped by more than 80% to $ 880 in the next bearish cycle.

Similarly, other high-end digital assets, including Cardano (ADA), Solana (SOL) and Avalanche (AVAX), are down 85% to 90% by 2021.

Edward Moya, senior market analyst at OANDA, said: “Crypto’s house is on fire, and everyone is right, you know, he is rushing to the exit because he has completely lost his confidence in space.”

BTC bear markets are not new

Bitcoin’s bearish forecast is expected to break below the $ 20,000-support level with Starkiller Capital, a digital asset hedge fund, with League Drogen, General Partner and CIO, forecasting the coin to drop $ 85% to a maximum of $ 10,000. Stage.

However, there is little evidence of Bitcoin’s overall decline, especially after the coin clashed with six bear markets (based on the 20%-plus corrections) in the past, each leading to a rally higher than the previous record.

BravenewCoin liquid index showing the Bitcoin bear market since 2011. Source: TradingView

Nick, an analyst at data source econometrics, sees Bitcoin as a stock market indicator, still in the “middle of the adoption curve.”

Bitcoin is likely to decline further at high interest rates.

Quotes

Between 1929 and 2022, the S&P500 increased by 200 x. That is about 6% annual return rate. […] Some of the disproportionate bets are clear and safe, just like buying Bitcoin now.

S&P 500 fell in the story. Source Econom Economics

Most altcoins die

Unfortunately, the same cannot be said for all the coins in the crypto market. Most of these alternative crypto currencies, or altcoins, have died this year. With some low-capital coins, in particular, a discount of more than 99%.

Altcoins with almost 100% losses by 2022. Source: Messari

However, projects with healthy adoption rates and potential potential beneficiaries are likely to rise sharply in the wake of the global financial crisis.

Ethereum, the top contender so far, is the first smart contract platform to leverage over one billion blockchain ecosystem with over $ 46 billion in defensive applications.

Ethereum also leads the smart contract sector. Source: Defi Lama

Other chains, Binance Smart Chain (BSC), Solana, Cardano and Avalanche, may also attract users as an alternative, confirming the need for their root tokens.

Meanwhile, older altcoins, such as Dogecoin (DOGE), are more likely to survive, especially given the potential for Twitter integration in the pipeline.

Overall, a macro-led bear market could affect all digital assets on board in the coming months.

However, VCX founder and CEO, Alexander Tachchenko, told Cointelegraph that low-value, low-value, and highly volatile coins are more likely to collapse. He added:

“Bitcoin and other cryptocurrencies need to be independent of cryptocurrencies, especially the US dollar, if they want to return to full force.”

The comments and opinions expressed herein are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every investment and business venture involves risk, you have to do your own research when making a decision.