Bitcoin Gains Anticipated as US Recession Becomes Likely

Bitcoin may see gains as predictions for a US recession gain traction. Experts observe rising unemployment and inflation pressures, putting the Federal Reserve in a tough position regarding interest rates. Analysts suggest a recession could ultimately position Bitcoin and similar assets in a better light as traders await policy changes from the Fed.

In a notable shift, Bitcoin is positioned to benefit as expectations for a US recession firmly settle into the mainstream view. Recent insights from The Kobeissi Letter present a concerning outlook for both the US economy and the Federal Reserve. As unemployment rises and inflation shows signs of resurgence, traders are on high alert, looking for signals that might indicate a loosening of US economic policy.

The health of the US economy is facing serious pressures, impacted by trade tariffs that contribute to rising inflation. The latest macroeconomic data reveals that the GDP for Q1 was disappointingly negative, against expectations of a modest increase of 0.3%. The Fed is now caught in a dilemma, as observers like Kobeissi call it the central bank’s “worst nightmare”. With the choice between managing inflation or boosting employment looming large, the Fed’s credibility is being tested.

The critical question remains around interest rate adjustments, which have become the focus for traders involved with crypto and other risk assets. Failure to cut rates could further aggravate the GDP situation and likely push unemployment rates higher. Conversely, an abrupt cut might reignite inflation, leading to a precarious balancing act for the Federal Reserve.

Indeed, Kobeissi has warned of a potential “lose-lose” situation where stagflation—a blend of rising inflation and unemployment—could emerge alongside a full-blown recession. Analysts have pegged a US recession as a “base case scenario,” substantially raised probabilities indicated by features on Kalshi, a prediction service.

Market expectations for the Fed’s policy adjustments are reflected in the latest data from CME Group’s FedWatch Tool, which indicates a cautious approach is in play through 2025. Despite assertions by US President Donald Trump for lower rates, the consensus hints that the June meeting of the Federal Open Market Committee (FOMC) might indeed trigger a reduction of 0.25%. Interestingly, the May meeting is now weighted at a mere 3% likelihood for similar cuts.

As traders digest these developments, there’s been a slight increase in the anticipated chances for a 25 basis point cut by the June FOMC, rising from 57% to 63%. This reflects an urgency given the current economic data’s pressure on Fed policy.

Even prominent figures in the crypto space, like trader Michaël van de Poppe, have noted that rising recession fears should prompt the Fed to reconsider its approach. Responding to the grim Q1 GDP results, he articulated a belief that these macroeconomic signals could indeed be a pivotal moment. Achieving greater liquidity may then allow risk assets, including Bitcoin, to flourish as market conditions become increasingly favourable.

As the situation unfolds, it’s critical for investors and market participants to proceed with caution. Every financial move entails risks, and thorough personal research is recommended before any decisions are made.

This article does not constitute investment advice; please make sure to assess your own strategies and risk tolerance accordingly.