Bitcoin, and the rest of the crypto market, performed extremely well in the first month of 2023. Most crypto prices are up more than 40 percent. But according to Bloomberg analysts, that could soon come to an end. Bitcoin is currently trading at a price of $22,789 and has a market cap of $439 billion.
Crypto could experience a recession this year
Mike McGlone, Bloomberg Intelligence’s senior macro strategist, says the crypto world could soon experience its first real recession. This recession could lead to falling prices and higher volatility.
The last US financial recession of 2008 led to the birth of Bitcoin. Although the premise of Bitcoin’s existence is to serve as an alternative to the fiat system, the currency still remains highly volatile. As Bitcoin is likely to experience its first major financial recession this year, the question is how much pain is left in the making before the upward trend resumes. The crypto market is heavily correlated with the stock market and a recession will almost certainly not do prices any good.
To compare what a recession could mean to the crypto market, Mike McGlone compares Bitcoin to the Nasdaq 100 index. He compares the Nasdaq 100 to its 200-week moving average and its performance during the last two recessions.
During the 2022 market crash, the Nasdaq bottomed 70% below its average. Similarly, during the 2009 recession, it traded 40 percent below average. If Bitcoin shows similarities, there is a possibility that it could drop below $10,000.
Despite Bloomberg’s warnings, some technical analysts are extremely positive about the prospects for the largest cryptocurrency. A strong bullish scenario emerges on the technical chart as Bitcoin is on the brink of a golden cross. This occurs when the 50-day moving average crosses the 200-day moving average.
Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors, said:
Most instances of a golden cross have resulted in favorable returns for Bitcoin, and many have occurred at critical long-term inflection points.
The recent developments surrounding US jobs raise the possibility that the Fed may continue to hike interest rates more aggressively going forward. It will be interesting to see how Bitcoin forms in the future.