Key Insights:
Donald Trump indicates the markets could see a recession in 2025.
Recession fears caused Bitcoin to crash to $76k levels.
However, the price recovered soon and Bitcoin was trading at $83k at press time.
A recession could trigger another rate cut by the US Federal Reserve which could bring a relief rally in the crypto markets.
In an interview with Fox, Donald Trump avoided a direct answer when he was asked: Are you expecting a recession this year? To which he replied:
I hate predictions like that. Because what we are doing is great. We are bringing weath back to America. Thats a big thing, and there are always periods of [recession]. It takes a little time. Its gonna be great ultimately.
US President Donald Trump
Several market experts believe that could be a sign that he expects a recession in the markets. As a result, Bitcoin crashed to $76k levels before bouncing back to $83k at press time.
Bitcoin Crashed to $76k Before Bouncing Back to $81k
CoinMarketCap
Donald Trump has threatened to impose several punitive tariffs on China, Canada, Mexico, India and other countries based on what he calls as of "unfair trade practices".
Together with the USA, these economies contribute a a major chuck of global trade.
There has been a global crackdown on cryptocurrencies with countries like France, Italy, and India imposing high tariffs, mostly above 30%. Two larger economies Russia and China have mostly banned crypto.
US Fed indicated in December 2024 that it would be very difficult to raise interest rates because of higher inflation. Previous estimates by the Fed suggest that it would be around 2.5% to 2.9% throughout the year. February's inflation data (to be released tomorrow) is estimated to be around 3%, higher than the Fed's previous estimates.
A rate cut at this point would release more money into the economy, increasing the inflation even further.
The war in Ukraine has led the US government to supply $65 billion worth of funds and equipment to the Ukraine government. This increased government spending, along with the excess spending by the US AID, has led to a rise in inflation (more money, fewer goods) in the US Dollar.
Further, the war has also caused a disruption in supply of wheat, edible oil and several other minerals that both Ukraine and Russia used to supply to other countries. For example, the war has threatened 30% of the global wheat supply and more than 10% share of the global crude oil supply.
Technically, a period is marked as recession when at least two previous quarters (or the last 6 months) have shown negative growth. This de-growth phase should be accompanied with a simultaneous rise in unemployment.
A period of recession generally leaves more people unemployed. As a result, there is less buying power in the market. Those who have money conserve it expecting hard times ahead. As a result, there is further lack of sales in the economy and it tanks further.
To avoid such a scenario of accelerating recession, government generally decreases the interest rates, which then releases more money in the markets, allowing users to purchase more, and hence strengthen the economy.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.