News agencies and the public become increasingly concerned whenever Joe Biden begins to speak about a possible recession. We can expect debates over whether the United States is, in fact, in a recession in the weeks ahead, but one thing is certain: we are on the verge of catastrophe.
Close attention is typically paid to the gross domestic product (GDP) as a major indicator to obtain an idea of the economy. When GDP decreases for two consecutive quarters, recessions are declared.
While a recession is influenced by a variety of variables, including unemployment, industrial production, retail sales, and income, many people are concerned that an extended downturn may be on the way because macroeconomic factors like inflation and supply chain problems aren’t healing as fast as predicted.
A recession has begun, according to some metrics, with GDP declining two quarters in a row to begin 2022. However, there is now a new asset class on the financial landscape, and it deserves consideration.
Cryptocurrencies have been around for the most part during a period when the United States had never really been that close to a long recession. The only time GDP dipped into recession territory since the Great Recession was in 2020 when the COVID-19 pandemic began and economies all over the world effectively came to a halt.
The cryptocurrency market, on the other hand, hasn’t had time to exhibit how it performs in a major recession. The first cryptocurrency was Bitcoin (BTC 4.86 percent), which was created in 2009. However, there have been several years of poor economic performance throughout the last 13 years that we can examine to get an idea about what crypto’s future may hold if a full-scale recession occurs.
In 2015, the economy went through one of the few downturns since 2009. GDP increased gradually at a slower rate every quarter after 2014, culminating in a 0.1% growth rate in the fourth quarter of 2015.
The S&P 500 also endured its first negative year since the Great Recession in 2015. In this period, the crypto asset class was savagely smashed. The overall market value of all cryptocurrencies fell by almost 70% from the start of 2014 to mid-2015, when it bottomed out.
In 2018, the economy experienced another period of uncertainty. The country’s GDP expanded at a slower rate each quarter in 2018 and eventually fell to a 1.3 percent growth rate. In 2018, the S&P 500 had its worst year since the Great Depression and lost 6% of its value.
Investors who have been in the game since 2018 are no doubt aware of the challenges that year has presented. Following an all-time high of around $750 billion, the cryptocurrency market cap plummeted and eventually fell to just over $107 billion, a drop of 88%. Bitcoin dropped from approximately $19,000 to roughly $3,000.
Comments are closed.