Is Bitcoin and Altcoin Market Going to Surger or Plummet?
This week, Bitcoin and numerous altcoins experienced a modest rebound, with the overall cryptocurrency market capitalization nearing the $3 trillion threshold.
Bitcoin (BTC) has managed to hold steady above $86,000, while meme coins such as Pepe (PEPE), Shiba Inu (SHIB), and Floki (FLOKI) surged by double-digit percentages.
Mark Zandi, a leading economist in the U.S. and the Chief Economist at Moody’s, has issued a cautionary note regarding the possibility of an impending recession.
In a recent post on X, Zandi highlighted that his primary recession indicator is “flashing bright yellow,” suggesting a potential economic downturn in 2025. He noted a significant decrease in consumer confidence, which has dropped 17 points over the last three months.
Zandi remarked that his key recession indicator activates when consumer confidence plummets by 20 points within three months. He contends that a decline of this magnitude typically results in reduced consumer spending, ultimately leading to a recession. A technical recession is defined by two consecutive quarters of economic contraction in the U.S.
Bitcoin and Altcoins Could Thrive During a Recession
A recession poses significant challenges for any economy, notably through rising unemployment rates and business closures.
Nevertheless, historical trends reveal that high-risk assets often perform well during major economic downturns. For instance, U.S. stocks entered a prolonged bull market following the Global Financial Crisis of 2008.
More recently, after an initial decline, stocks and cryptocurrencies experienced a vigorous bull run. Bitcoin surged from $4,000 in March 2020 to $69,000 by November 2021. In the same timeframe, Ethereum soared from a low of $80 to $4,940.
This resurgence was largely fueled by the Federal Reserve’s interventions during downturns through rate cuts and quantitative easing.
Risk assets typically shine when the Fed lowers interest rates, as this cheapens capital and fosters a risk-on sentiment across financial markets. Should a recession occur, as Zandi cautions, Bitcoin and other altcoins might gain from such economic conditions.
Conversely, Bitcoin and altcoins could also thrive if the U.S. manages to avert a recession. This potential downturn is largely attributed to tariffs enacted by Donald Trump. Thus, scaling back or eliminating these tariffs could entice investors back into riskier asset classes.