Quick Facts

The likelihood of a recession in 2025 has become the “base case scenario.”
Bitcoin traders are preparing for the fallout.
Reserve is facing a daunting task, with macroeconomic data suggesting trade tariffs and resurgent inflation.

Bitcoin Seeks Upswing as Recession Becomes Probability

The US economy is on a collision course with recession, and Bitcoin traders are already preparing for the fallout. According to a recent analysis from The Kobeissi Letter, the likelihood of a recession in 2025 has become the “base case scenario.” This news has sent shockwaves through the markets, and Bitcoin is poised to gain from the resulting economic uncertainty.

Fed’s ‘Worst Nightmare’ Becomes Reality

The Federal Reserve is facing a daunting task, as the latest macroeconomic data suggests that trade tariffs and resurgent inflation are poised to wreak havoc on the US economy. The latest GDP data came in markedly below expectations, turning negative against a forecast 0.3% gain. This has left the Fed with a lose-lose situation, where reducing interest rates would further weaken the economy, but leaving rates unchanged would lead to stagflation.

Bitcoin’s Silver Lining

However, not everyone sees the upcoming recession as a disaster. Michaël van de Poppe, a crypto trader, analyst, and entrepreneur, believes that the rumors of a potential recession will actually strengthen the thesis for the Fed to loosen up its policy. “The rumors for a potential recession is increasing, which should strengthen the thesis for the FED to loosen up the policy,” he wrote on Twitter.

Van de Poppe also pointed out that the recession will lead to increased liquidity and a risk-on sentiment in the markets. “That will likely be a low on the markets, liquidity to be added and risk-on to thrive,” he tweeted.

FedWatch Tool Reveals Market Expectations

According to the CME Group’s FedWatch Tool, market participants expect the Fed to make its next rate cut in June, with a 63% probability of a 25bps cut. This data provides valuable insight into market expectations and the potential impact on Bitcoin.

The Recession’s Impact on Bitcoin

So, what does this mean for Bitcoin? In the short term, the recession could lead to increased volatility and uncertainty, causing Bitcoin’s price to fluctuate wildly. However, in the long term, the recession could actually benefit Bitcoin.

In times of economic uncertainty, investors often flock to safe-haven assets such as gold and Bitcoin. This increased demand can cause the price of Bitcoin to rise, as more investors seek out shelter from the storm.

Lower interest rates can also benefit Bitcoin, as they reduce the opportunity cost of holding the asset. With interest rates expected to decline, more investors may be willing to hold onto their Bitcoin rather than selling it to take advantage of higher-yielding investments.

Finally, the recession could lead to increased liquidity in the crypto markets, as more investors seek out alternative assets. This increased liquidity can make it easier for investors to buy and sell Bitcoin, causing the price to rise.

As the economy teeters on the brink of recession, investors would do well to consider the potential impact on Bitcoin. While the short-term volatility may be daunting, the long-term benefits of holding onto the asset could be significant.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Sources:

Bitcoin Seeks Upsurge as Recession in 2025 Becomes a Growing Probability