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Crypto experts reveal what to expect from crypto during a recession

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Crypto experts reveal what to expect from crypto during a recession

Crypto experts reveal what to expect from crypto during a recession
Sergeitokmakov /Pixabay

There is no such thing as a “recession-proof” investment, but certain types of investments such as digital assets could get away with it if the economy slips into a recession.

The threat of a recession is real and many see it as inevitable. As stocks fall into a bear market on fears that aggressive rate hikes from the Federal Reserve and a sharp rise in inflation could plunge the economy in a looming recession, many are wondering: should you invest in crypto during a recession? And should it be considered a safe haven or is it at risk of further declines due to its speculative nature?

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What to expect from crypto during a recession

Tammy Da Costa, analyst at DailyFX comments:

Thinking back to 2020 when the coronavirus pandemic drove the global economy into a brief recession, Bitcoin lost around 62% in one month (February to March 2020). After that, quantitative easing and big stimulus packages allowed the crypto to rally, which was exacerbated by Elon Musk’s endorsement. Now the narrative has changed.

Quantitative tightening and rising inflation have reduced consumers’ purchasing power. Institutional investors and major crypto exchanges are under strain and many are on the brink of collapse. Over the past two months, the collapse of Terra, Celsius, Three Arrows Capital and the job cuts of several key players (including Coinbase) make resuming a bullish move even more difficult. With aggressive rate hikes set to continue through the end of the year, digital assets are in a tough spot unless a change in the fundamental backdrop eases recession fears.

Scott Sheridan, market expert and CEO of tasty works comments:

I’m not sure crypto can be considered a safe haven given its volatility. I think part of the appeal of crypto had to do with the fact that stock valuations were high. You had a lot of money chasing alpha and the perceived risk/reward in chasing high-value stocks was too risky. Crypto, on the other hand, does not have the same valuation metrics. It is still in its infancy, as are its valuation models. This ambiguity, when it comes to valuations, is what has allowed investors to justify the pursuit of higher prices. If I’m right, I would expect crypto volatility to outlast equity volatility, which is something you don’t want if you’re looking for a safe haven.

I don’t see the crypto turning around until stocks do and market volatility decreases, as measured by VIX. Once we get back to a VIX near its average of 18, then I think you will see stock prices level off and at that point you might see crypto leveling off or starting to rise. Until then, I think the combination of potential alpha in equity markets and the changing state and subsequent turmoil in crypto is more speculative oriented than safe. of the storm..”

Dr. Martin Hiesboeck, Head of Blockchain and Crypto Research at Defend:

The digitization of the economy includes the adoption of blockchain technology. Investing in digitization also means investing in automating, cybersecurity, software systems and machine learning. Many digital assets are closely tied to this space and should perform very well, ESPECIALLY during a recession. The only pure currency in what are mistakenly called “cryptocurrencies” is Bitcoin. So far, it has failed to deliver on its inflation hedge promise.

Currently, we do not believe at all that we are in a scenario of recession or stagflation. The situation is more like that after World War II, when we had a few years of high inflation and slow growth before the world recovered from the shock of war. The situation is now very similar. Institutions are well aware that blockchain technology has a place in their business models and is something they cannot ignore. Solid digital asset projects with real economic utility will perform well regardless of the macroeconomic environment.


About tasty labors

tastyworks is an online brokerage platform specially designed for options traders. The promising online broker is a subsidiary of tastytrade, one of the fastest growing online financial networks in the world.

About sustain

Uphold is a multi-asset digital currency platform offering financial services to a global marketplace. Uphold’s unique “Anything-to-Anything” trading experience allows clients to trade directly between asset classes with integrated payouts facilitating a future where everyone has access to financial services.

About DailyFX

Launched in 2002, DailyFX.com, IG’s free news and research website, is one of the world’s leading sources of information and analysis on the currency, commodities and commodities trading community. clues.

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