Will Bitcoin Rise In A Recession? My Diagnosis is that the Crypto Currency Markets Will Sink If Anything Bad Happens!
Will Bitcoin rise in a recession? The current economic conditions are not looking good. There is a lot of talk about a possible recession, and even if that doesn’t happen, there is still a lot of uncertainty in the air. This is causing many people to wonder how different investments will perform in this climate.
One investment that has been getting a lot of traction over the past few weeks, and more broadly over the past several years, is that of Bitcoin and the Crypto Currency markets. My personal opinion, is that with rising inflation numbers, with the fed hiking interest rates a huge amount in 2022 and 2023, and with possible rising unemployment numbers over the next 12-24 months, that we will see a fairly significant price correction in Bitcoin and other alt coins, to the tune of a 40% to 50% drop.
Is Bitcoin Overvalued?
How will this correction happen? Well, there are a few mechanisms that I see playing out that will lead to this reduction in Bitcoin’s price.
1) First, we have seen a lot of institutional money flow into the markets over the past year. This is from companies like Square, which put $50 million into Bitcoin, or like the O’Leary Fund O’Shares, which has 20% of its entire asset allocation in Crypto right now.
2) These institutional investors have been buying Bitcoin and pushing the price up.
3) Most of these institutional investors are buying Bitcoin with the intention of holding it for the long term, not for speculation.
4) Therefore, if we see a sharp increase in unemployment in the next few months, as many are predicting, then these institutions may be waiting for exactly this, and they may be looking for their massive buying opportunity once the moment is right.
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How I Am Allocating My Portfolio, And Why I See a Price Drop In Bitcoin Over The Next Few Months
I am currently allocating a small portion of my portfolio to Bitcoin, and I plan to increase this allocation if the price drops over the next few months. Here’s why.
1) We are seeing an influx of institutional investors buying Bitcoin.
2) Most of these are very well known companies, such as Hedge Funds, big name CNBC contributors, and even the large wealth management company Morgan Stanley.
I am keeping my allocation low and am sizing up as the price drops, reducing my average buy price.
Will Bitcoin Out Perform The S and P 500 Over The Next 5 Years? Why I Say Yes.
1) Bitcoin has outperformed the S and P 500 by a large margin so far this year.
2) While the US stock market is at an all-time high, many people are still skeptical about it, and it is historically over-valued when looking at it’s Price to Earnings Multiple.
3) Bitcoin is still in its early stages of adoption, and we are seeing more and more companies adopt Crypto as both an investment class and a mode of payment. Bitcoin will have an increased price as the coins become more legitimate and take over a large part of the fiat economy.
Final Thoughts On Will Bitcoin Rise In A Recession, My 18 Month V-Shaped Bitcoin Forecast
My diagnosis, and I agree with a very popular article that I read on Seeking Alpha this morning, is that Bitcoin could actually FALL in a recession, and fall pretty significantly. Not only does it seem to correlate with the stock market, but I know for a FACT that it correlates to interest rates, just like ALL assets correlate to interest rates. ie. when interest rates fall, Bitcoin will rise, because more money will flow into Crypto, but as Interest Rates rise, Bitcoin will decrease, in that a risk free asset now looks more attractive. I personally think that what will happen is, the interest rate hikes will fare somewhat poorly for Bitcoin, causing a 20%+ price correction. Once we get here, institutional money will start flowing in at a higher rate, and inflation will reduce, resulting in better Real Rates of Return, which will drive the price back up. My plan is to buy the dip, if I see Bitcoin in the 20,000s at all, I’m grabbing it. What do you think of our financial opinion? Read on or subscribe to our blog for additional details and information.
Cheers!
*Inflation Hedging.com
Sources:
https://www.bankrate.com/banking/cds/cd-rates/
https://money.cnn.com/data/markets/
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