Will Bitcoin Tank If A Recession Hits, IMF Issues Warning

The crypto market has been showing signs of decline recently as prices of Bitcoin and other crypto assets keep dropping. With the hikes in interest rates from most of the global central banks, the global economy is getting tighter. The impact on both the crypto and traditional markets is significantly devastating.

Following the events, the International Monetary Fund (IMF) warned about economic decline. Furthermore, it speaks of a possible worse global recession in 2023. This means that financial markets will go risk-off, creating extreme fear for the markets.

Hence, there could be a drastic decline in the prices of crypto assets and conventional stocks.

The price of Bitcoin has depicted a strong correlation with equity assets for more than a year. This is seen with most of the trends for BTC and some stocks in most cases. Several factors and conditions have been highlighted as explanations for the correlation. One of the stocks with a solid link to Bitcoin is S&P 500.

Bitcoin witnessed a price drop during the global pandemic recession in 2020. This was the same story for equity stocks. But as the economic conditions gradually progressed positively, the system transited accordingly. As a result, the crypto and equity markets sold off in December 2021 and May 2022.

Most of the correlated trends could indicate the performance of markets for securities once they hit a certain liquidity threshold. But, conversely, it could suggest that institutional fund has reached a sizable portion of capital inflows.

The price of Bitcoin could be tossed around firmly and fiercely despite the causative factors of a declining economy. However, the primary crypto asset could meet a drastic fall once there’s a global recession. This will propel investors to pull out their funds through massive sell-offs.

The price of Bitcoin will boost in a situation with favorable intervention. For example, the US Federal Reserve and other central banks globally could take the IMF warnings and cut down rates to curb recession. Such a situation will create a price rally for Bitcoin and other crypto assets. Also, equity stocks will strive positively.

However, there could still be hope even without the intervention of the central banks. This means that a recession will emerge and pull down the crypto market, with the price of BTC dropping. Such lower prices could become an attractive entry point for some investors of the crypto assets.

Recall that the 2008 recession brought no prominence to Bitcoin. But following its collapse in March 2020, the primary cryptocurrency got a massive bull market that spiked its dominance in the crypto market. From then, Bitcoin rallied far above the equities and has been sustaining its stance.

With the overall outplay of events, Bitcoin depicts a bullish outlook on a long-term basis. At press time, the BTC price is around $19,137, indicating a drop over the past 24 hours.