CoinShares Says Bitcoin (BTC) Is Likely to Succeed in a Rally of Disbelief in the Face of Economic Recession
A leading digital asset manager believes that a murky financial outlook for the US could be bullish for Bitcoin (BTC).
In a series of posts, CoinShares Explain how a confluence of economic factors and government policy decisions is likely to see Bitcoin’s performance diverge from that of other investment assets as the reality of a recession sets in.
“While we think we’ll likely see the US Federal Reserve continue to raise interest rates through the summer, we also think it’s likely to take a softer outlook on economic growth going forward, leading considerable dollar weakness.”
The firm predicts that BTC will rise if the Federal Reserve cannot rein in inflation and dollar strength wanes, noting that growth stocks would suffer more from a deterioration in economic conditions.
“We believe a policy error is very likely, where Bitcoin prices are likely to diverge from growth stocks, with the former likely to benefit from a dovish Fed and a weaker US Dollar, while seconds underperform in the face of a recession or stagflation.”
CoinShares too said that even though BTC hasn’t rebounded despite the Fed raising interest rates four times this year alone, the king of crypto could still reward investors.
“Although Bitcoin’s price performance has been weak in the face of an aggressive Fed, this current disruption in price performance may be short-lived.”
The latest information comes two months after CoinShares discussed at length the impact of a recession on Bitcoin’s price outlook.
At the time, the company also drew attention to the price of oil and the recent turmoil in crypto markets while assessing how interest rate hikes and the strength of the US dollar affected the valuation of BTC.
“Bitcoin now has a well-established inverse correlation to the US dollar.
This makes sense due to its emerging store of value characteristics, but it also makes it incredibly interest rate sensitive.
Bitcoin’s correlation to gold has declined while it has increased significantly when correlated to stocks, especially interest rate sensitive stocks such as growth stocks.
CoinShares also called Bitcoin “both a growth asset and an emerging store of value,” and thus predicted that the comparative similarities to stocks would diminish over time.
The analysis concludes,
“Unfortunately, we believe that the United States and the rest of the world are likely to slide into economic decline in 2023, although there are many unknowns. Perhaps it will be stagflation which then evolves into recession? With the liquidity trap really gripping central bankers, we think Bitcoin is a good insurance policy against this monetary policy mess.
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