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The Times reported that the United States was in a technical recession as GDP shrank by 0.9% each year after the second quarter report was released Thursday.
The graph below shows the real US GDP compared to Bitcoin prices since 2017. As GDP declines, we can see that Bitcoin prices are on the rise.
However, it is important to remember that correlation is not a de facto causal relationship. Just because Bitcoin tends to be bullish while GDP is rising does not mean that one has caused the other. Still, the comparison clearly shows that Bitcoin can thrive in a thriving economy.
Recently released data show the most important warning signs of a recession on the horizon, which can make the execution of new bulls more difficult.
In addition, US citizens’ personal savings have reached their lowest levels in 10 years, indicating that funding from stimulus packages is no longer supporting the economy. With a savings of only 5.4%, that means that rising interest rates are likely to bring little benefit to small investors. However, this expansion will affect credit card payments, mortgages, and other loans held by US citizens.
Savings have declined, but consumer loans have increased, reaching a record high since the FRED record began in 2000. With interest rates rising 900% annually, more than $ 850 billion of consumer loans will be issued to US citizens.
At the beginning of 2022, the interest rate was 0.25%, the loan worth $ 804 billion was unpaid, and the annual interest rate was about $ 2 billion. Six months later, as of July 2022, the interest rate was 2.5% and the $ 878 billion loan was unpaid. The resulting interest payments will increase 1,000% to $ 22 billion.
During the same period, Bitcoin’s price fell by 48% and its market capitalization fell by $ 417 billion. By comparison, US consumer total debt is now nearly twice the market capitalization of Bitcoin, and annual interest payments represent about 5% of Bitcoin’s total value.
Quantitative easing is in place Since then The 2008 global economic crisis.
Assets held by the Federal Reserve, the European Central Bank and the Bank of Japan have declined for the first time since 2018 and the longest period since 2012. Major central banks now hold $ 9 trillion more than they did in early 2020. To give an overview of this, Bitcoin charts since 2009 are shown in orange at the bottom on the same scale, with a peak market cap of only $ 1.3 trillion.
Bitcoin is up 15% from its local lows on June 26th. At the time of writing, it was trading at $ 23,891, up 5% since GDP data was released this afternoon. Is this an escape to the security of a non-fiat asset class, or is it just a bear trap to seduce investors?
Some macro factors indicate a bearish future for the US economy. But traditionally, the market bottoms out before the recession ends. The Yahoo! Charts Treasury below highlights one- and two-year returns after the recession. One year after the recession began, the average return for the S & P 500 is 40%.
Bitcoin has never survived a recession (except for the start of a pandemic), so it’s interesting to see if it can surpass S & P in the next 12 months. Bitcoin will be $ 33,600 this time next year, up 40% from today’s price.
FRED data and insights by James van Straten
