Banks in both the U.S. and Europe were in turmoil heading into the second quarter. Since the end of 2022, economic, financial and business analysts have been cautious about the coming recession. JPMorgan Chase & Co CEO Jamie Dimon has warned that weakness in the banking sector increases the risk of a recession in 2023.
Jamie Dimon: Bank failures could lead to recession in 2023
Will the Financial Crisis Cause a Recession? Does oil or some other item trigger it? Could it start with real estate the way it did during the 2008 Great Recession? Severe weakness in the banking sector became evident in the market in the first quarter of this year, suggesting it may have started as a banking crisis.
The International Monetary Fund warned this week that “shadow banking,” or non-bank financial firms, could also endanger financial stability. JPMorgan Chase CEO Jamie Dimon warned in a recent letter that it won’t be like 2008, but the next recession will last for years:
“As I write this letter, the current crisis is not over, and if it is, its consequences will be felt for years. But it is important to note that recent events are different from what happened during the 2008 global financial crisis ( little impact on regional banks).”
If Dimon is right, the economy is more prone to recession, which could be a macro headwind. Bitcoin price could face strong resistance before the cycle turns. But that could be a headwind for Bitcoin, it all depends on how the economic disruption goes away.
This year’s recession could easily end Bitcoin’s bull run. Additionally, slowing economic growth could drive down prices and drag down the entire cryptocurrency industry and financial markets. This would be in line with the trend of correlation between technology stocks and Bitcoin, and investors will be more inclined to take risks during economic recessions.
However, a mild enough recession with certain characteristics could also have some adverse effects on the way Bitcoin. During a recession, it will become increasingly likely that the Fed will lower interest rates to stimulate growth. That could push investors’ money into the cryptocurrency market in search of profits following lower lending rates.
Higher ratios in TradFi may just be the motivation some institutional investors — who have already entered the crypto space — need to make some big trades in search of excess returns (alpha) for their portfolios. It’s a brave new world, and it’s constantly changing, so past results are of course no guarantee of future performance.
- Peter Schiff Praises ChatGPT for Not Investing in Bitcoin
- Economist David Rosenberg warns of ’emergency landing’ and recession
According to CryptoPotato