Bitcoin Could Experience Significant Decline in a Recession, Warns Crypto Analyst
A leading voice in the crypto space, Nicholas Merten, has cautioned that Bitcoin could see a substantial decline if the U.S. economy enters a recession. Merten, known for his YouTube channel DataDash, believes that the Federal Reserve’s hawkish stance may lead to a prolonged economic downturn in the United States.
Who is Nicholas Merten?
Nicholas Merten is the founder of DataDash, a popular YouTube channel with over 512,000 subscribers. He provides comprehensive analysis and insights into cryptocurrencies, blockchain technology, and financial markets. Merten has gained a reputation for simplifying complex financial topics, making them accessible to both newcomers and experienced investors.
Potential Recession and Impact on Bitcoin
Merten suggests that if commodities like oil, natural gas, and uranium stabilize or decrease in value, it could be an indication of an upcoming short-term recession. In such a scenario, he anticipates that equities might experience a downturn similar to the 33% correction seen in October 2022. This could translate to a drop in Bitcoin’s price range to around $15,000 to $17,000. Merten views this as a relatively favorable outcome as it could set the stage for a double bottom in most asset classes.
According to The Daily Hodl’s report on Merten’s analysis, he stated:
“[A short-term recession] is going to cause a little pain. Equities will probably go back down towards their lows, that 33% correction that we saw back in October 2022. Bitcoin could likely come back down toward a similar low range that it saw before around $15,000 to $17,000. And that would actually be a pretty good scenario. We may be getting a double bottom across most assets.”
Bitcoin’s Bull Market and Liquidity
Merten argues that a sustained Bitcoin bull market is unlikely until the Federal Reserve starts increasing liquidity in the economy. He points out that Bitcoin has been trading sideways from March to October 2023, unable to break through resistance levels between $28,000 and $32,000. Merten advises investors to adopt a cautious approach and wait for clear signs of optimism and increased liquidity, which are crucial for risk-on assets like Bitcoin.
Bitcoin’s Current Price and Outlook
At the time of writing, Bitcoin is trading at around $27,939, up 0.5% in the past 24-hour period with a year-to-date return of +66.81% against USD.
Another Analyst’s Warning
Mike McGlone, Bloomberg Intelligence’s Senior Macro Strategist, also warns about the potential decline of Bitcoin due to negative liquidity and rising global interest rates. He believes that the U.S. is likely to face a recession by the end of 2023, which could significantly impact Bitcoin. McGlone identifies the $30,000 mark as a crucial resistance level for the cryptocurrency and suggests it is more likely to decline toward the $10,000 range. He also sees substantial risk for the broader cryptocurrency market if a recession triggers a stock market downturn.
Hot Take: Bitcoin Vulnerable to Recessionary Trends
The warnings from analysts like Nicholas Merten and Mike McGlone highlight Bitcoin’s vulnerability to recessionary trends. The possibility of a short-term recession and lack of liquidity could lead to significant price declines for Bitcoin. It remains essential for investors to closely monitor economic indicators and market conditions to make informed decisions about their cryptocurrency investments.
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