Speculation about a potential US recession in 2024 has been rife, with several indicators pointing to this possibility.
In such a scenario, several financial assets, including Bitcoin (BTC), are likely to be affected, as the asset has shown susceptibility to events in traditional finance.
Notably, Bitcoin has yet to be tested in a recessionary environment, so its performance will be closely watched. That’s why Finbold consulted OpenAI’s latest artificial intelligence (AI) tool, ChatGPT-4o, for insights into how Bitcoin might trade during a recession.
Factors Affecting Bitcoin in a Recession
The AI tool highlighted several factors that could affect Bitcoin’s price. ChatGPT-4o noted that some have historically viewed Bitcoin as “digital gold” or a safe-haven asset during economic uncertainty.
If this perception persists, demand for Bitcoin may increase during a recession, driving up its price. However, during times of extreme financial stress, the AI platform noted that investors may choose to liquidate assets, including Bitcoin, to cover losses or secure cash, potentially driving its price down.
Central banks can also implement quantitative easing or lower interest rates to counter a recession, leading to higher liquidity in the market. This could increase Bitcoin’s price as more money enters the financial system. Bitcoin can attract investors looking for an inflation hedge if inflation is high, pushing its price up further.
The regulatory environment will also play a decisive role. Positive regulatory developments can enhance Bitcoin’s appeal as an investment, boosting its price, while negative regulatory actions can depress its price, even in the midst of a recession. Increased institutional adoption can also support Bitcoin’s price during economic downturns.
Finally, market dynamics such as Bitcoin’s supply and overall cryptocurrency market trends will affect its price.
Bitcoin price prediction
Based on the identified factors, ChatGPT-4o outlined three potential scenarios for Bitcoin’s price in the second half of 2024 in the event of a recession.
In a bullish scenario, if Bitcoin is considered a safe haven asset, inflation is high, and monetary policy is accommodative, Bitcoin’s price could rise significantly, possibly reaching $80,000 to $100,000 or higher, depending on the recession’s severity and the response of traditional financial markets.
In a bearish scenario, if investors seek liquidity, face regulatory crackdowns, or if there is a broad selloff in risk assets, Bitcoin’s price could drop from $50,000 to $60,000 or lower, depending on the magnitude of the selloff .
Elsewhere, in a neutral scenario, Bitcoin could trade within a range if the impact of the recession is moderate and the factors affecting Bitcoin’s price balance each other out. In this situation, Bitcoin can move around $65,000 to $75,000.
Bitcoin untested during a recession
In line with Bitcoin’s possible response to a potential recession, investment research platform Game of Trades highlighted that Bitcoin continues to be strongly influenced by broader economic cycles, as evidenced by its close relationship with the ISM Manufacturing PMI.
In an X (formerly Twitter) post on June 7, the experts warned that a potential recession in the second half of 2024 could have a significant impact on Bitcoin’s price. This caution stems from the fact that Bitcoin has not yet been extensively tested in such an economic environment, leaving its future performance in the midst of a recession uncertain.
Bitcoin price analysis
At press time, Bitcoin was trading at $69,350 with daily losses of around 2.6%. On the weekly chart, Bitcoin is up 2.61%.
Meanwhile, Bitcoin continues to consolidate below the $70,000 mark, and breaching this level will be central to helping the crypto target new highs.
Disclaimer: The content on this website should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk.
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
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