Cryptocurrency, Bitcoin (BTC), U.S. Markets–On Oct 18, Bloomberg ran a report on a model produced by large financial institution JPMorgan claiming that the U.S. market has a 60 percent chance of entering a recession over the next two years, leading some to wonder how such a shift would impact the industry and marketplace of cryptocurrency.
While the chance of a U.S. recession is 28 percent according to the model over the next year, that figure more than doubles to 60 percent over the next two years and, even more troubling, 80 percent within the next three years. It’s clear, given the overwhelming statistic cited, that the major banking institution is putting their weight behind the odds of a recession occurring on the near horizon.
While JPMorgan’s note did not include specifics on the magnitude of the recession, and how it would compare to that of 2008’s meltdown of both the traditional stock market and that of the U.S. housing market–a recession which eventually extended to global markets–it’s clear that that another recession will have implications for numerous sectors, including that of cryptocurrency. JPMorgan’s model included “indicators ranging from consumer and business sentiment to prime-age male labor participation, compensation growth, and durables and structures as a share of gross domestic product,” and ultimately came to a more pessimistic conclusion than that of the recession tracker presented by the Federal Reserve Bank of new York. Compared to the 28 percent chance of recession in the next year that JPMorgan determined , the Federal Reserve Bank is calling for only a 14.5 percent.
However, according to an article by CCN, numerous economists are echoing the data of JPMorgan, with the expectation forming that a recession is likely to occur by 2020. According to the Federal Reserve Bank of Atlanta, two out of every three business economists in the United States expect a recession to occur by the end of 2020, with the primary cause being cited as due to trade issues.
Given the tug of war nature between the traditional financial markets and that of cryptocurrency, the thought is growing that crypto may become the alternative investment to watch in filling the void of a slump in stock and equity markets. While cryptocurrency is about to enter the eleventh month of an ongoing bear cycle that followed the boom in crypto pricing to end 2017, adoption and general recognition for the industry of blockchain and cryptocurrency assets has grown during that time. More and more banks are developing infrastructure to incorporate investment into cryptocurrency, with the potential Securities and Exchange Commission ruling over Bitcoin Exchange Traded Funds coming by the end of the year–a move that could signal an influx of institutional investing.
In addition, respected companies such as IBM, Volkswagen and PNC Bank have been tied to blockchain or cryptocurrency based projects, leading to a greater perception that the technology is permeating industry in a positive direction. Even Facebook, the social networking goliath which instituted a crypto-based ad ban that it subsequently overturned, has been tied to rumors of a potential crypto partnership with Stellar XLM (rumors that were denied by the company in the aftermath).
Cryptocurrency has a real potential as both an appreciating digital asset and decentralized currency of benefiting from a U.S. recession, particularly if institutional investors are looking to safeguard themselves in the coming volatility of traditional markets.