The International Monetary Fund has issued a new warning for the global economy. The IMF says the worst is yet to come. That could mean lower bitcoin prices in the near term.
The IMF downgraded its forecasts for the global economy on Tuesday, warning in clear terms:
“The worst is yet to come, and for many, 2023 will look like a recession.”
As the old joke goes: “A recession is when your neighbor loses his job. Depression is when you lose yourself.” If 2023 looks like a recession to many, as the IMF warns, financial markets tend to be at risk. That could mean a drop in the price of stocks and cryptocurrencies.
Bitcoin Price Still Correlated With Stocks
Bitcoin price has been closely correlated with stocks for over a year and a half now. There are many theories about the factors behind that correlation.
It can only show what the stock market is sure to do when they reach a certain liquidity threshold. Or it could be an indicator that institutional money has made up a significant portion of inflows.
Regardless of the causal factors, the bitcoin price is likely to face a strong and persistent headwind. If the world economy falls into a recession, BTC could drop as investors withdraw their cash close.
The price of Bitcoin fell during the fast pandemic recession in 2020, along with stocks. The crypto market sold off along with stocks in December 2021 and May 2022.
Long-term bullish outlook for BTC
On the other hand, now, it is possible that the price of bitcoin will rise from the intervention of the Fed. If the Federal Reserve and other banks cut interest rates to combat a recession, BTC is likely to recover.
However, in both cases, even without central bank intervention and a recession dragging the bitcoin price down, the cryptocurrency will still be attractive at these prices.
That’s because Bitcoin from the very beginning rose to prominence as a response to the 2008 recession. Then it had an incredible bull market after the worldwide asset price crash. in March 2020. BTC had a rally far beyond the stock market.
The lesson here is that the market takes risks with bitcoin and other risky assets in bad times, but in good times, when it comes to bad times, they capitalize on bitcoin with cash flow. to prepare for the next economic shock. That is a positive long-term outlook.
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