How will Bitcoin react to the next recession?

“Will Bitcoin survive a recession?” or “What will happen to bitcoin in a recession?”

This article aims to answer that question by taking a look at the facts and making healthy assumptions since Bitcoin hasn’t been through an actual recession.

Bitcoin: The Digital Gold

The properties of Bitcoin is why it has been named as Digital gold. Bitcoin’s hard cap makes it scarce, like gold, hence, there can only ever be 21 million BTCs. It needs to be minted by spending energy, just like gold, and it cannot be minted at a faster rate at the expense of more energy.

Gold and the Great Recession

During the 2008 financial crisis, the gold prices plunged by almost $300 from $1000 to $700 and the reason for this was, in part, liquidity shortage in the credit market.

What does this have to do with Bitcoin?

In the recent Bitcoin sell-off, which has come to be known as ‘Black Thursday’, Bitcoin faced a pressure similar to that seen in 2008.

Bitcoin and the “2020 Recession”

Bitcoin would react exactly the same way gold did in 2020, especially, if the OI from these institutional players continues to rise. Although the recent sell-off was due to the institutional exit, this created a retail panic causing the sell-off to be extended.

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GDA Fund

GDA Fund

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GDA is developing the decentralized financial application development environment and rapid financial engineering protocol built on Ethereum.