“We haven’t had them go through a real recession and the question I ask myself is, if you take bitcoin now, what is the greater probability? That it will double in value or that bitcoin will halve in value?,” Jonathan Macey, professor at Yale Law School who studies corporate finance, said by phone. “And I think the odds are that it’s going to halve in value.”
It’s difficult to say what event or news could help bitcoin and other risky assets start to form a floor. Many are scouring charts and sentiment readings, though some have turned to history. The coin offers many case studies. Bitcoin’s peak-to-trough decline in 2018, for instance, exceeded 80%. That year, the coin posted multiple double-digit rallies and declines.
“I wouldn’t look for a sustainable rally there until the Fed’s getting ready to lower rates again,” David Donabedian, chief investment officer of CIBC Private Wealth Management, said by phone. “And that’s quite a ways away.”
Meanwhile, BitGo’s Belshe says a recession could help “filter out weaker projects.”
That’s an argument that’s often heard in the crypto space: Exuberance can spawn many new projects, some of which can be sketchy or outright scams -- downturns can help wring out excesses.
“While I don’t see bitcoin dropping to $20,000, if the price of bitcoin does continue to decline, it would help filter out weaker projects and allow us to focus more on projects with more long-term viability,” he said. “I don’t welcome a recession -- it does have real impact on people’s lives, which is unfortunate. That said, crypto is not responsible for a recession in this case.”
This article was provided by Bloomberg News.