Recession Fears Erupt Amid Bullish Crypto Market Sentiment, What’s Next

With the Bitcoin price sliding below $100k, the crypto market sentiments drifted away from the ‘Greed.’ However, the outlook can get even worse, as the recent market finding hints at the possibility of a global economic recession, which could create a major crash for all financial markets. Let us discuss the analysts’ recent findings on the recession and its impact on the crypto industry.

Bullish Crypto Market Sentiment at Risk With New Recession Prediction

An on-chain analytics firm, Bravos Research has brought investors’ attention to a rare but historically significant event. According to the firm, the yield curve has just un-inverted, and the last three times it happened, it led to economic downturns. Overall, these findings highlight the possibility of the upcoming recession, as the short-term bond yield has dropped below the long-term yield before reverting. Interestingly, this is the widely popular and accurate indicator of economic recession, which predicted the Great Depression of 1929, the dot-com crash in the 2000s, and the financial crisis 2008.

Now, the yield curve has been inverted ever since early 2023 but has finally been un-inverted, concerning the investors and their sentiments. However, there are minor changes that could delay the recession. The Bravos Research findings revealed that there is un-inversion but the 10-year yield rose, which has not happened in the previous cycles. Additionally, the GDP growth and unemployment hikes in the previous recession align with the falling yield. However, that is not the case in the present situation. The rise in 10 year-yield shows resilience in economic fundamentals.

Yield Curve Recession Prediction

Eventually, this divergence disturbs the recession prediction, but it does not completely change that. The recession’s possibility could still continue and affect the Bitcoin and the market despite the rise of unemployment rates and the steepening of the yield curve.

How Will the Crypto Market React?

Although the crypto market often moves against the traditional market, the recession and similar macroeconomic events could also break the performance of digital assets. As all the financial markets rely on capital inflow, a recession can impact investors’ risk-taking sentiments. Meanwhile, the interest rate goes up, which prevents borrowing to invest. However, historical records also show that compared to the traditional market, recovery in most cases is faster in terms of crypto sentiments. Regardless, Bitcoin and the rest of the top cryptos have not witnessed a major recession. This is why an accurate market behavior prediction is hard to conclude.

For now, analysts believe that increasing bond yield could trigger volatility in most financial markets, whose impact will be seen in crypto market sentiments as well. However, as the reports hint, if the recession is delayed, it could present further opportunities for strategic accumulation.

What Investor Should Do Next?

The crypto market depends on hundreds of factors and could occasionally bring high volatility. The recession period will bring a similar outcome but on a higher level. For situations like this, crypto analysts have often suggested working with a diversified crypto portfolio and implementing risk management tactics. More importantly, investors should look for a long-term growth outlook and invest in utility-based tokens like Bitcoin. The Rich Dad and Poor Dad, Robert Kiyosaki, say, buy and forget. Interestingly, Kiyosaki confirmed a global market crash but called that a buying opportunity rather than a threat.