Bitcoin Could See a Rally in a Recession, Says Fidelity Investments Analyst
Jurrien Timmer, the global macro director at Fidelity Investments, suggests that if an economic recession occurs, it could trigger a significant rally for Bitcoin (BTC). According to Timmer, the current high-interest rates need to decrease in order for Bitcoin to experience substantial gains. He emphasizes that a change in the macro narrative from restrictive to accommodative is necessary for Bitcoin’s continued growth. Timmer’s chart illustrates a price range for Bitcoin based on its adoption rate and real interest rates. He predicts that if interest rates decline, Bitcoin could reach a high of $96,210 by the end of 2025. Additionally, Timmer believes that during a recession, investors may view Bitcoin as a safe haven asset alongside gold, leading to higher prices.
Bitcoin’s Potential in the Next Market Cycle
Timmer asserts that Bitcoin has become less correlated to equities and less volatile. Its annual volatility has decreased from 85% in 2021 to 55%, and its 12-month correlation has fallen from 65% to just 7%. Therefore, he suggests that Bitcoin may offer uncorrelated returns in the next market cycle. Furthermore, for Bitcoin to reach new all-time highs, Timmer believes that the Federal Reserve must inject more liquidity into the markets through quantitative easing. This action was taken during the Covid-19 pandemic to stimulate the economy. The increased money supply benefited both gold and Bitcoin. Timmer argues that if the money supply grows faster than its long-term growth rate, gold’s market share tends to increase.
The Current State of Bitcoin
At present, Bitcoin is trading at $26,931 with a 0.5% decrease in the last 24 hours.
Hot Take: Bitcoin’s Potential During an Economic Recession
Fidelity Investments’ Jurrien Timmer believes that a recession could have a positive impact on Bitcoin. If a recession occurs, Timmer suggests that the Federal Reserve would pivot, leading investors to view both gold and Bitcoin as high-powered hedges. Additionally, Timmer highlights the importance of declining interest rates and increased liquidity from the Federal Reserve in driving Bitcoin’s growth. With its decreasing correlation to equities and lower volatility, Bitcoin may offer uncorrelated returns in the next market cycle. Overall, Timmer sees potential for Bitcoin to thrive if economic conditions shift towards accommodative policies.
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