Recession in the United States: Do you have to worry about your Bitcoin (BTC)? The opinion of American experts

The retrospective is in every conversation these days, and for good reason.

Today’s Gross Domestic Product report showed the US economy contracted for a second straight quarter, and if you’ve been paying close attention in macroeconomics class, you’re probably going to start panicking.

Many economics students have at some point reduced that “two consecutive quarters of decline” equates to the definition of a regression. But it depends on who you ask the question. And these days, if you listen to policy makers, they point to a whole different standard.

The National Bureau of Economic Research (NBER), which most US analysts and officials rely on to determine the timing of business cycles, says a regression is not defined by GDP alone.

According to the NBER, a decline is “a significant drop in economic activity that extends throughout the economy and lasts for more than a few months”. The inherent subjectivity gives policymakers, including the Federal Reserve, much-needed leeway — very different from the easy-to-classify definition of “two quarters.”

“It was simple to understand, it was black and white,” said David Wessel, senior fellow in economic studies at the Brookings Institution and former economics editor for the Wall Street Journal. “The NBER definition is a bit mushy, for good reason, because there are a lot of factors.”

The NBER was created in 1978, and going back in time, “two consecutive quarters of declining GDP” was the only definition there was, Wessel said.

GDP could indicate how the economy is doing, but the numbers are often revised, with the average revision over time being 1.5%. This is why the NBER’s approach might provide a more useful assessment, although most of the time the “two quarters” standard still works.

“The gap between output and income is particularly wide in the first quarter of this year, leading some to believe that GDP will likely be revised and may not actually be negative in the first quarter,” Wessel said.

Two U.S. Treasury Department assistant secretaries posted a lengthy message on the internet this week laying out what they are powerful as “considerable evidence” that “the economy is not currently in a downturn,” even though GDP has contracted for two consecutive quarters.

This week, a Fox News correspondent asked a White House spokesperson why President Joe Biden’s administration was “trying to redefine the term ‘recession'” when “we all understand that a pullback is two quarters sequences of negative GDP growth. (“That’s not the definition,” the spokesperson replied).

Similarly, at a press conference this week, a reporter asked Federal Reserve Chairman Jerome Powell if he considered the U.S. economy to be down if GDP fell in the second quarter.

“The Fed is not passing judgment on this,” Powell said. “Although, if you think about what a regression really is, it’s a generalized decline in many industries that’s also been hanging around for more than a few months and there’s a bunch of specific tests in there. And that doesn’t seem to be the case.”

Earlier on Thursday, Treasury Secretary Janet Yellen reiterated Mr Powell’s point, saying that a semantic battle should be “avoided” over whether the country is on the back foot, and that a regression is a “general weakening of the economy”, and that “this is not what we see now”.

What does this mean for bitcoin?

For traders of crypto-currencies, and more specifically bitcoin, the question arises: Does it matter at this point that the United States is in retreat?

“We are slowly learning that bitcoin is not a ‘store of value’ but rather an ‘excess store of value,'” said Jeff Dorman, chief investment officer at digital asset manager Arca Funds. See the article: Bitcoin “could dive even lower,” as low as $13,000, one trader warned.. “Whether or not we are in retreat is irrelevant.”

Negative wealth fueled by declining business confidence and spending, as well as business revenue, is leading to lower demand for bitcoin, Dorman said, but from a structural perspective, the greater cryptocurrency in terms of market capitalization is not affected.

“Bitcoin is nothing more than a call option on a future where bitcoin is used as real money in the face of declining faith in fiat money,” he said. “Therefore, the price of bitcoin is simply a reflection of whether this probability increases or decreases, and from this perspective, a regression could in theory increase the likelihood of investors seeking an alternative to government fiat. Fiat is a term that many crypto analysts use to describe government-issued cash that is not backed by physical commodities like gold.

Given that most markets, including those for cryptocurrencies, have already suffered significant losses this year due to macroeconomic uncertainty, it remains to be seen whether calling this period a “regression” or the leaving it unlabeled would matter.

“I don’t care about a loss,” said Bob Iacchino, chief strategist at Path Trading Partners and co-portfolio manager at Stock Think Tank. “You just number a period and number an economic period, but I don’t care if you name it. Either people favor or they don’t.

Bitcoin and most other cryptocurrencies have rallied since Powell’s dovish press conference on Wednesday and Thursday’s GDP number. Bitcoin was changing hands above $24,000 Thursday night, up 8% over the past 24 hours.

“The rally in risky markets may be a premature assessment of a potential slowdown in rate increases in reaction to the negative GDP print,” said Paul Eisma, head of trading at XBTO Group.

“We are in a data-driven environment, so any economic numbers that point to slowing demand and growth, or easing inflation, inflation expectations, will support risk assets – including include bitcoin, crypto. »

💎 Open an account for free to Invest in crypto!

CoinHouse allows you to easily invest in crypto-assets. Creating an account is free and takes just a few simple steps.

📈 Trade cryptos online in just a few clicks!

BitPanda allows you to trade crypto easily online. Creating an account is fast, free and very simple.

Be vigilant and consult your financial adviser before making any investment decision. Mirror-Mag cannot be held responsible in the event of bad investments. Before using any third-party service, you should do your own research.

Thomas E.
The latest articles by Thomas E. (see everything)

Leave a Comment