In short: The U.S. Federal Reserve no longer predicts a recession, leading to a cautious rally in Bitcoin and crypto markets. However, experts observe signals for a recession, such as a decline in M2 growth and deflationary pressures. The inverted yield curve, hitting levels unseen in over 40 years, also suggests a recession. The impact on Bitcoin is uncertain, with some seeing it as a safe haven and others suggesting it may behave like a risk asset. The next two months' macro data will be important for Bitcoin and crypto investors to monitor. The current Bitcoin price is $29,523.
Our quick analysis:
Arguably the most crucial takeaway from yesterday's FOMC meeting: no recession in sight! Well, that's quite a relief, isn't it? The U.S. Federal Reserve (Fed) Chairman Jerome Powell's statement seems to have put investors at ease, ushering in a cautious rally in both traditional finance (tradfi) and the crypto markets. But hold on, let's not get carried away just yet. While Powell paints a rosy picture, historical data whispers a different story about the potential for a recession. So, should we hit the panic button or raise a glass of champagne? Let's dive into the signals and insights that are causing mixed feelings among experts.
Prominent financial experts have been raising their voices about the current economic situation, and they don't just sound like the chorus from a boy band. Steven Anastasiou, a renowned economist, has been drawing attention to the decline in the annual average M2 growth. With an alarming -2.7% YoY, he points out that a falling M2 money supply has historically been correlated with economic depressions and panics. Anastasiou seems to be painting a darker picture than Powell's sunny forecast.
Deflationary pressures are another aspect of concern. The US Consumer Price Index (CPI) growth rate has been on a decline for 12 consecutive months. Drawing parallels to the deflationary bust of 1920-21, Anastasiou emphasizes that now is not the time for additional tightening. Yet, Powell chose to raise the federal funds rate to levels not seen in over two decades. Brace yourself for some contrarian opinions.
Jurrien Timmer, the director of global macro at financial giant Fidelity, has been analyzing historical data on recessions. He points out that the lead times between changes in monetary policy and economic consequences vary significantly. From 2 months to a staggering 19 months, the duration depends on the economic circumstances. Timmer's insights suggest that the monetary policy cycle tends to precede the economic consequences. Various historical cycles, such as the 1970, 1973-74, 1990, 2001, and 2008, exhibited different lead times that may give us a hint at what lies ahead.
And let's not forget the inverted yield curve, the dark herald of economic recessions. Guess what? It's currently hitting levels unseen since the golden years of 1981. You know, when the music was groovy and shoulder pads were a fashion staple. So, what does this mean? According to the ever-witty gold bug Peter Schiff, the talking heads on CNBC may try to downplay it, but he believes we might be heading towards the granddaddy of all recessions, even venturing into the terrain of a depression! Strap yourselves in, folks!
Now, amidst all this economic turbulence, Bitcoin and the crypto market are displaying some impressive green numbers. But here's the catch: Bitcoin, unlike traditional assets, hasn't experienced a recession. So, it's safe to say that uncertainty is looming. Some experts argue that Bitcoin may act as a safe haven during troubled times, while others suggest that it might behave more like a risk asset, making it less appealing in a recession. It's a bit like the flip of a coin—heads you win, tails you lose.
Macro analyst Henrik Zeberg and the founders of Glassnode, Yann Alleman and Jan Happel, have a rather eye-opening perspective. They believe that we are heading towards the largest crisis since 1929, with deflation followed by stagflation. But before that, they predict a blow-off top—a sudden rally in stocks, Bitcoin, and crypto markets. It's like a rollercoaster ride, folks. Strap in tight, because things are about to get wild!
So, where does that leave us? Nobody really knows how the economy will react this time. It's all a bit of a waiting game. The macro data of the next two months, such as CPI, PCE, jobs, unemployment rate, and earnings, will be key indicators for Bitcoin and crypto investors. As Powell tirelessly repeated—"data dependency." Keep an eye on those numbers, folks, because they can sway the tide.
At the time of writing, Bitcoin continues to grind its way up the ladder, trading at $29,523. Buckle up, grab your calculator, and let's see how the numbers play out.
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Disclaimer: Our articles are NOT financial advice, and we are not financial advisors. Your investments are your own responsibility. Please do your own research and seek advice from a licensed financial advisor beforehand if needed.
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