Bitcoin risks another massive selloff on recession fears, asserts analyst as BTC wobbles around $20K

Key Takeaways:

  • Bear market presents opportunities for buying the dip, says Ecoinometrics.
  • The bear market is headed for recession, experts at Citi Bank assert.
  • Bitcoin (BTC) could hit $10,000 or less.
bear market bitcoin btc inflation recession
image from medium.com

YEREVAN (CoinChapter.com) – The current bear market will surely send Bitcoin into a pit, according to crypto analytical platform Ecoinometrics. But the platform also suggested bear markets are a “great time to hunt for asymmetric bets” instead of “crying in the shower.”

Also read: Is Bitcoin Really Dead?

Is the bear market a good time to stock up on BTC?

In detail, an asymmetric bet is simply an investment where the potential upside dwarfs the downside risk. Ecoinometrics called Bitcoin an “obvious asymmetric bet” and explained its stance.

Since the upside of these bets is typically massive, you don’t need to play with leverage. That gives you tremendous staying power which is exactly what you need during a volatile bear market. For the same reason you don’t need a lot of startup capital to make big absolute returns.

commented Ecoinometrics.

Also read: Bitcoin bottom finally in, says analyst who predicted BTC crash in 2021

The platform further asserted that those bets could be used for wealth creation, not only wealth preservation. Additionally, Bitcoin survived so many crashes that it is “unlikely to disappear.”

Finally, bear markets tend to accentuate the asymmetry of those bets. Since prices are already depressed, the upside potential is higher while the downside risk is decreased. The upside? 7x to 25x simply based on the bet that it will replace at least financial gold.

However, the question remains, how deep of a pit lies ahead?

Bear market to recession

Experts a Citi Bank assert that the probability of the world economy succumbing to a recession is nearing 50%. In detail, the Federal Reserve’s aggressive quantitative tightening policy, coupled with weakened demand for goods, will contribute to pushing the bear market into full-blown recession, the economists say.

Interest rate hikes globally. Source: Bloomberg.com
Interest rate hikes globally. Source: Bloomberg.com

Disinflation often carries meaningful costs for growth […]. Central banks may yet engineer the soft – or “softish” – landings embodied in their forecasts (and in ours), but this will require supply shocks to ebb and demand to remain resilient.

asserted Nathan Sheets.

Also read: Inflation will ease with a 5% unemployment rate says Lawrence Summers.

However, the experts pointed out that inflationary dynamics proved to be “stubborn.” Thus, economic growth of 3% this year and 2.8% in 2023 is a “reasonable expectation.”

Meanwhile, as Ecoinometrics pointed out, “regardless of the terminal rate, we are heading into a recession, so risk assets are f****d.” As a part of risk-on assets, the crypto market suffered heavy losses in the previous months, and the bottom is not yet.

Bitcoin holds $20K

Bitcoin value barely held above the crucial support level at $20,000, as the BTC/USD exchange rate stood near $20,200 on June 22. However, experts see a deeper pit ahead, with BTC possibly hitting $10,000 or less.

Bitcoin (BTC) daily price action. Source: TradingView.com
Bitcoin (BTC) daily price action. Source: TradingView.com

Also read: MicroStrategy’s debts start coming due as Bitcoin slides below $21K

Is BTC to $10K a possibility?

Julian Van Erlach, the author of asset valuation theory dubbed Required Yield Theory (RYT), weighed in on the issue. The expert asserted that Bitcoin and Gold have a crucial characteristic in common: the limited supply.

The scarcity means that real GDP growth is “generally greater” than the supply growth of Bitcoin and gold, unlike fiat money, where supply growth exceeds real GDP growth.

Moreover, the real GDP increases per unit of Bitcoin and gold, “which can be considered an inherent real yield.” Conversely, holding fiat money is a negative real yield equal to the inflation rate.

Also read: Terra contagion will crash Bitcoin to $10K, Ether to $300 in 2022 — analyst.

Should the Fed continue on its announced asset reduction path, I believe the real yield (5-year TIPS) will approach and may surpass 1%, which coupled with the investment-driven price spike unwinding will easily push Bitcoin well below $10,000.

commented the expert.

Van Erlach added that panic selling could push its price even lower than the model predicts.

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bear market, Bitcoin risks another massive selloff on recession fears, asserts analyst as BTC wobbles around $20K

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