A recession is looking more and more likely for several reasons. They are cyclical, and the timing is about right for another one. Political winds often play a part in consumer confidence, which in turn plays a large part in the perceived strength or weakness of an economy. Those political winds around the world are not blowing in a way that produces confidence in the future well being of most consumers.
How will crypto perform in a global downturn? That is not an answer that can be made from an historical perspective as crypto hasn't been around long enough to show what sort of performance we can expect. But if you accept that the markets are made up of two groups - institutional investors who keep an eye on charts and indices and complex mathematical formulas; and individual investors who are trying to build wealth for a later stage in life - both groups may come to the same conclusion.
The prime directive for both groups is to put their money in a "safe haven". Traditionally this safe haven has been gold and real estate. In the last recession real estate proved to not be a particularly safe place to hold wealth. This time around I'm not seeing the price of gold rising particularly fast as it has in past impending recessions.
I have two tickers on my desktop. One for the price of Bitcoin, and one with the NYSE, Dow, NASDAQ and a few select stocks I follow. In the past months I've seen the stock market ticker bouncing around like a kid with a super ball. And yes, crypto has shed value, but it has not seemingly reacted to the highs and lows of the stock exchanges. It seems to be following it's own path and that path is, by and large, pretty stable when compared to traditional stocks.
I suspect that what we could see is crypto becoming the "safe haven" for wealth that is fleeing traditional stocks and bonds. All currency, all stocks, all investments of any sort have the value that the holders feel it has. It has no intrinsic worth. It's a perception of value.
If stocks and bonds and other investment instruments lose the confidence of investors, they won't leave the investment market, they will look for an investment instrument they feel will hold value. If the signs prove true and we do enter a recession two things could come to pass. It will probably be a global recession and cryptocurrency stands a good chance of becoming that investment instrument that holds the perception of value.
Can't say whether we will see a global recession early next year or the year after that. The central banks and failed govt policies have to induce another recession. Also lack of understanding amongst general public about how credit is useful and how economies work will make matters a little worse.
Whether crypto will see a boost during the next recession is also a very difficult question to answer. That primarily has to do with lack of data. Bitcoin or crypro are a numerical way of understanding network effects. For the first time, one can value a network based on number of adopters. So if adoption goes up during the recession, surely crypto will see a boost.
However, one also needs to understand, what money has already gone into crypto? I think its mostly early adopters who have invested personal money and are in it for the long run. However, the market could also have benefitted from the massive money printing exercise carried out by central banks, which has led to money flowing into riskier assets, hence the rise of venture capital and em investing. If some of this money is pulled back during the next recession, crypto will bleed even more. Crypto largely is seen as a risky volatile asset class. However some also see it as a 0 correlation asset class. During a rising economic cycle, when mutual fund inflows are going up globally thanks to economic expansion, the second group of investors will have surplus to implement their idea. During a downturn, people will move to capital preservation and funds will also see large outflows. That's also thanks to the fact that money is controlled by people who have lived with those financial investment strategies all their life. I don't think a recession will likely see a large institutional inflow in crypto and institutional money will always dwarf retail money. The scale is just incomparable.
Adoption on the other hand can create a powerful network effect. However for that the financial system should be under threat. And dapps and blockchain needs to become even more iser friendly. I dont think this financial crisis will be about banks, or about governments. Actually it may be about govts. Because the debt from 2008 passed from banks to central banks really. If people understand how fucked up traditional finance is and how cocky elites have become, and user experience of crypto is made easier, crypto will see exponential growth during next recession. However, those ifs in the last sentence are massive and people too busy overconsuming gossip and goods to realize anything.
If there is a recession that is coming. So far, at the moment it's hard to know. There are those analyst who are in the gloom and those who are cautious but say that the market is still doing well and the US is actually doing better than ever in terms of economic indicators are concerned.
"Earnings are going to continue to come in better than most people expect," he said. "If the S&P is right on the bottom of the operating earnings estimate of $177 for 2019, depending on what kind of multiple you want to put on that, you see the S&P above 3000." I extracted this from the article.
The bull may still be heading north. It may go but if it hovers back to 21000 range and doesn't go up higher but instead heads downwards, there is a risk of recession
There is still more research to be made. Hypothetically, .when the economy is going into a recession then, investors need to find a new place to hoard their cash which sounds good in cryptos. Plus cryptos are getting stabilized at the moment. The good thing is that if the cryptos do not just go up like mount Everest or the Japanese bullet train, then I can see that, the risk of a drop from the new highs won't be harsh as every investment chart follows the laws of physics. A strong blast for the prices to rise would result in the price heading south really badly. Everyone would start to invest back into cryptos but more cautiously as they would be afraid of the repeat of 2018 January which sees cryptos millionaires go bust and some have gone to become super duper rich. For the next run, the good way is to just sell half of it when it has hit a high and do check the charts to see if there is a risk of the prices buckling off the cliff.
We'll have to wait and see. The best is just to be ready for all scenarios. Studying the charts isn't a bad idea. It would give you a rough guide on what the prices would be and where it would be. It's like being a captain of a vessel and having a rough map to guide the directions.
I don't think so. Central banks have followed a very loose monetary policy for the last decade which means that there has been a lot of money sloshing about and looking for something to invest in. If there is a credit contraction in the near future, then extremely risky and volatile investment vehicles such as cryptocurrencies will suffer. The latest crypto bubble has popped already. If a recession is due in the near future, cryptocurrencies will go down further but not by anything like the two orders of magnitude as most altcoins already did. Many altcoins may be at a great risk of dying, though. Large market cap coins or middle-tier coins such as Steem that have a strong community will probably survive. With RocksDB as the backend it should be cheap enough to run a full Steem RPC (RPC = Remote Procedure Call) node for the chain to survive a price level around a few cents.
I believe so without a doubt. Once the stock market tames down and starts to drop people will be looking for a market to invest in. With the crypto markets so low right now I can not see any other scenario than wise invvestors putting their money in bitcoin and other coins as they go to the moon.