A recession in the United States could halt the growth of cryptocurrencies


The cryptocurrency markets have risen 22% over the past seven days with a total market capitalization of $ 200 billion. The increase took the figure to $ 1.1 trillion, the highest level in five weeks.

However, the markets are still out of the bullish territory, remaining 64% below the peak of more than $ 3 trillion reached in November 2021.

The momentum could reverse very quickly as several macroeconomic factors come into play this month. Similar factors have been responsible for the large spikes in stocks and cryptocurrencies this year.

A recession is looming in the United States

On July 28, the US Bureau of Economic Analysis (BEA) will publish its preliminary estimate of second quarter GDP (gross domestic product) growth.

GDP measures the market value of all final goods and services produced in a country during a given period.

This is important because two consecutive quarters of negative GDP mean the country could be in a technical recession. For the United States, the first quarter figure was -1.6%.

On July 19, the Atlanta Fed revised its GDP forecast to -1.6%, as in the first quarter. Cryptocurrency critic Peter Schiff noted that most of Year 1 was in a recession:

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Bank of America Atlanta has re-released its #PIL forecast for the second quarter. It is now -1.6%, in line with the first quarter. It’s amazing how many analysts haven’t predicted a #recession in their economic forecasts for 2022 or even 2023 when the economy is likely to be in recession throughout 2022. -Peter Schiff.

A recession would be bad news for risky assets like cryptocurrencies and tech stocks. Therefore, the bad news next week could effectively extinguish the current market sentiment and put an end to the growth of the cryptocurrency market.

Furthermore, the US Federal Reserve is expected to raise rates again by 75 basis points next week. Rising interest rates are also bad news for cryptocurrencies, as they discourage investors and encourage hedging. This makes traditional bonds a little more attractive and much safer than volatile cryptocurrencies for the average retail investor.

bear market

These two factors alone could drive the bears back to MB and push cryptocurrency prices to new cycle lows.

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Earlier this week, analytics provider on the Glassnode chain reported that current bullish conditions are showing all signs of a low … except for duration.

Using the Bitcoin Realized Price (BTC Quote) metric, I calculated the average time the asset spent below this level in previous bear markets and compared it to the current one. Bitcoin’s realized price is the value of all BTC in circulation at the last-move price, which is an approximation of how much the entire market has paid for its coins.

The average time spent in the bear market below the realized price is 197 days; this cycle only saw 35 days below that level. At press time, Bitcoin was trading just above the strike price of $ 21,934 to $ 23,363. As history rhymes and the macroeconomic storm intensifies, there may still be a lot of patience.

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