Bitcoin is unlike any other financial asset on Earth. One of the reasons is due to it being incredibly volatile. In stocks, if there was a price movement up or down by 10%, it would be talked about all year. With Bitcoin, that same price movement would simply make it another Monday. Financial experts have predicted that someday Bitcoin could reach a price of $1 million or more. It is this volatility that makes it possible. But, sometimes the volatility goes to the downside as well.
Throughout Bitcoin’s history, it has survived through countless challenges and obstacles. Each time it got knocked down, it stood up and became even stronger. This is a quality that most people overlook in the cryptocurrency market. It isn’t about the price going up, or even having the best features sometimes. When it comes to money, it is all about trust. You wouldn’t want to keep your savings in an asset that has never been tested before. Or even worse; when it was tested, it didn’t live up to expectations.
With that said, Bitcoin’s greatest test could be on the horizon.
Since Bitcoin gained traction in the market and became popular, it has never lived through a difficult financial situation. Stocks were always going up, interest rates were always low, people were taking risks in the market, and there was relative peace around the world. However, the most important aspect is that Bitcoin has never lived through a recession or depression before.
When the market goes completely risk-off, and when people have absolutely no money to invest in a risky asset Bitcoin. What will happen?
While no one wants to see the world go through a recession, or see Bitcoin’s price drop because of it. This is actually a much-needed step toward Bitcoin eventually reaching its full potential. If it can survive through a recession relatively unscathed and become even stronger on the other side of it. This could be the final pin that convinces Wall Street, and other corporations to finally begin investing in Bitcoin.
But as I mentioned before. People don’t have money to invest in Bitcoin right now. People are hurting financially all around the world. With inflation causing the price of goods and services during the last few years. People are struggling simply to make ends meet each month. Let alone having extra money to put into Bitcoin.
During hard times, investors go risk-off. Instead of investing in up-and-coming tech ventures or something like crypto. They tend to put money into well-established and necessary goods that everyone needs. This is another factor that could cause the price of Bitcoin to sell off in the future.
However, markets can act irrationally much longer than anyone expects. Even though the economy is hurting, there still aren’t that many houses on the market. A market, that many thought would pop while interest rates were drastically increasing. It very well could still happen in the near future.
The same goes for Bitcoin. One of the golden rules of Bitcoin is that no one should ever try to predict what it will do. It thrives on being unpredictable. A fool is quickly separated from their Bitcoin. If the FED continues tightening and raising rates AND the US goes into a recession. Most people would expect the price of Bitcoin to drop significantly. But it wouldn’t be that shocking if it didn’t. Look back to the banking crisis that happened earlier this year. While the banking market was in a state of panic. Bitcoin was soaring. A similar situation could play out again while investors are looking for safety rafts during the possible recession.
One thing is for certain, it will be interesting to see what happens.
How about you? How will Bitcoin perform during a recession
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As always, thank you for reading!