Bitcoin price would have these effects in the face of recession and tension in China, Taiwan and the US.

Key facts:
  • According to analyst Cárdenas, bitcoin will see its lows between October and the beginning of 2023.

  • From another position, the economist Motyl thinks that the macro context would benefit BTC.

While some specialists predict a drop in bitcoin (BTC) due to the impact of a recession and international political tensions on the markets, others expect the opposite. This can be seen between the projections of two specialists from different areas who spoke with CriptoNoticias.

They are the financial analyst and investment adviser Alberto Cárdenas and the economist Natalia Motyl, who answered this question that revolves among investors: What effect will a recession and tension from the United States, China and Taiwan have on the price of bitcoin?

Cárdenas believes that bitcoin has not yet hit its bottom in this bear market

To answer such a question, Cárdenas first clarifies that, from his point of view, the recent rally in bitcoin and ether (ETH) has been a bear market rally perfectly predictable and natural within the adjustment processes. Consider that these increases do not mean that they will continue to rise or that we have already passed the lows of this bear season.

Indicates that “there is potential” for more significant drops in the price of bitcoin and other cryptocurrencies between October 2022 and early 2023. He thinks that in that season we will see the last 60 days of the cycle, which he estimates are always the wildest. In this way, it maintains a price forecast for that time below the annual lows that they recently stepped on.

“In my opinion, we have not seen the lows in the crypto asset market in prices, nor in the regulated markets. The main reason is that we are in a cycle of draining liquidity that has not ended. Mainly due to the adjustment of rates of the two most important central banks (of the United States and Europe).”

Alberto Cárdenas, financial analyst and investment advisor.

He warns that the United States needs to keep raising interest rates, at least an additional 1% between now and the end of 2022. He understands that this will be accompanied by adjustments or rate hikes from the European Central Bank. “This is not good for risk asset prices and I think we are going to continue to see downward pressure,” it states.

Bitcoin would see its lows between October and early 2023 as stress continues

The specialist points out that in addition we do not know how far the conflict between China and the United States can go. Although he maintains that this reflects a deterioration in trade relations, which will translate into an impact on the economy. Consequently, he believes that, around a recession, companies will feel it via reduced profits and higher inflation.

“The conflict between Taiwan and China is an issue that is not good for the market, for many reasons. The most important is that conflicts (especially war conflicts, when it comes to the two most important powers on the planet, the United States and China), can exacerbate the problem that the markets have right now, which is inflation.

Alberto Cárdenas, financial analyst and investment advisor.

“This is not good news for the market,” he sums up. Therefore, he estimates that we could expect further stress and major price declines in bitcoin as well as other cryptocurrencies. This while we continue in the midst of a rate tightening cycle and a situation where geopolitical risks may be exacerbated between the Russia-Ukraine and US-China conflict.

bitcoin price chart for august 5, 2022
The price of bitcoin suffered a drop this week due to the unpleasant visit for China of a senior US official in Taiwan. Source: CoinGecko.

As advice to investors, he says he would tread carefully and prudently. “My message is that we haven’t seen the lows for the year yet. Do not be in a hurry to seek risk, rather you have to have a somewhat defensive attitude and be patient. Better opportunities will probably come during the rest of the year from a long-term perspective », she concludes.

From other eyes, Motyl sees that this context can benefit cryptocurrencies

With a different perspective, Motyl says that “a new exogenous shock” is going to affect the economies. Above all, to those who are in a situation of greater vulnerability, which he understands could increase the demand for bitcoin and other cryptocurrencies as protection.

Details that surely there will be an outflow of capital to safer ports and, in the face of large-scale armed conflicts, countries tend to close down. “That is going to have a negative impact on trade openness.” In addition, he mentions that all armed conflicts imply an increase in public spending, so the pace of monetary issuance, tax rates and debt ratios can be increased.

“Given this context, it can be something positive for the cryptocurrency ecosystem, since it implies that the currencies of the main countries tend to depreciate over time, so that people will tend to take refuge in safer assets and that will lead to to a financial freedom that cryptos offer today,” he says.

Notice that While cryptocurrencies could benefit from this environment, we are going to see a drop in major stocks and bonds in the short term. As for the long term, if this scenario of recession materializes, he sees that there would be more indebtedness, corrosion of fiscal accounts, a drop in economic activity and a rise in unemployment.

In this way, the specialists consulted show two different projections for bitcoin: its price drop to lows not seen in the year vs. a rebound, after the impact of a recession and macro stress that grows with the conflict in China, Taiwan and the United States. Given this, it will be necessary to closely follow the international context to decipher its impact on the cryptocurrency.

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