Most economists were already predicting a recession in 2023 after large interest rate increases by the Fed, and in just 14 months, the US central bank raised interest rates from around zero to the current range of 5.00-5.25 percent. This results in higher borrowing costs and significant pressure on the economy, which aims to keep inflation under control.
Unemployment claims are also now starting to rise and the economy appears to be weakening somewhat as a result of interest rate increases. Should we worry about recession?
Recession coming?
The number of Americans filing for unemployment last week reached its highest level in a year to a year and a half. The largest increase in claims in nearly two years is primarily due to problems in Ohio, Minnesota and California.
However, economists caution against exaggerating these numbers too much. “The jump in claims may be a sign of an uptick in layoffs, but given the fluctuations in claims from week to week, it seems too early to draw any conclusions.” thus Conrad Dequadris Van Pereen Capital in New York.
In the end, the number of claims reached 261,000, while it was expected that 235,000 would come out of the machine. Regarding unemployment, the situation in the United States is not so bad. At 3.7%, it is still at a historically low level.
In this regard, fears about recession seem somewhat exaggerated at the moment, but we should not forget that we are dealing with an economy that has become accustomed to interest rates that have been at almost zero percent for a decade.
What does this mean for Bitcoin?
If we enter a recession, the question remains whether this is a good thing for Bitcoin. In the short term, there is a very good chance that people will flee to fiat currencies. In the end, everyone has to pay the bill in US dollars or in our case, euros.
You often see that in a recession people choose relative safety and sell assets to pay the bills. In this regard, there is little chance that the recession will have a positive impact on Bitcoin in the first months.
Once central banks cut interest rates and buy assets to stimulate the economy, things could get interesting. Hence the quantity of dollars in the system increases and the relative scarcity of the US dollar decreases.
This could be the moment when investors look for scarcity and, for example, end up buying Bitcoin or other risky assets.
