Key facts: Bitcoin is now more mature as an asset than it was years ago. Bitcoin could show strength in a crisis scenario, or decline in the face of a market crash. The probability of a recession in the United States remains high. This situation creates uncertainty in the market, raising the question of how it will impact bitcoin (BTC). A recent report by analysts and researchers Robert and Sam Kovacs indicates a possible recession in the next 12 monthsThis is evidenced by an inverted yield curve in the United States, which has anticipated the last seven recessions. As can be seen in the following chart, The North American country seems to be heading towards that situation.There you can see the downward curve in purple.
Inverted yield curve in the United States. Source: S&P Global. An inverted yield curve is a graph that shows the relationship between interest rates and bond maturities. It is a situation in which short-term interest rates are higher than long-term interest rates. Among the reasons why an inverted yield curve may occur is the expectation of an economic recession. In this context, Investors may believe that the economy will slow down in the futurewhich could lead to lower interest rates. “While the Fed’s stance appeared hawkish given its commitment to controlling inflation, projections indicate that rate cuts are on the horizon,” comment Robert and Sam Kovacs. A recent report from S&P Global confirms what the researchers said, indicating that The economy is likely headed for a recession in 2025 if the Fed does not begin to ease rates in the second half of the year.
The probability of a rate cut is high
Analysts at the financial services firm Citigroup agree with Robert and Sam Kovacs. In a report last June, they indicated that the Federal Reserve will likely begin cutting interest rates in a few months, with the process extending into next summer (in the northern hemisphere). These cuts would be carried out in response to signs of a slowdown in the economywith the Fed expected to cut rates by 25 basis points eight times, starting in September and extending through July 2025, they estimate. Such a move would reduce the benchmark rate by 200 basis points from the current range of 5.25%-5.5% to 3.25%-3.5%, where it will remain for the rest of 2025. Citigroup predicts cuts at each of the Fed's seven meetings after September, under its baseline scenario. The recession scenario It could be driven by a financial bubble as has happened in the past.say Robert and Sam Kovacs.
What role does AI play in the economy?
Historically, The Fed has cut interest rates to prevent an economic collapse after the stock market bubbles burst. These bubbles often coincided with major technological advances, such as electrification in the 1920s, computing in the 1980s and the rise of the Internet in the 1990s, explains the report by Robert and Sam Kovacs. The current expansion of the stock market has been largely driven by the expectation of the growth of artificial intelligence (AI)For example, NVIDIA, a microprocessor company key to AI advances, has seen a 700% increase in its price since 2023, making it the largest stock in the S&P 500.
NVDA price historical chart – Source: TradingView. Last May, it presented a quarterly report showing that it had revenues of $26 billion, 18% more than in the fourth quarter of last year and 262% more than a year ago, as reported by BitcoinDynamic.
There are concerns that the AI market is overhyped, similar to the dot-com bubble of the late 1990s.analysts say. However, unlike the dot-com bubble, AI “has the potential to significantly transform the way business is done and consumption is done,” the report says (note that this same description applies to dot-coms). While a market correction is possible, AI is likely to “continue to drive economic growth over the long term,” according to Robert and Sam Kovacs. In fact, they believe the Fed could cut interest rates later this year to mitigate any negative impact from a potential bubble burst.
Bitcoin Price Outlook
Given this scenario, it is worth considering the role played by Bitcoin and the stock market. Historically, Bitcoin has shown a high correlation with traditional assets such as the S&P 500 and Nasdaq indices. However, in the current context, this relationship is changing, as can be seen in the following TradingView chart.
Correlation of BTC and S&P 500. Source: TradingView. The S&P 500 has been rising for months, while bitcoin has been on a downward trend in recent weeks. Bitcoin's disconnection from these indicators may be due to the performance of some companies. The S&P 500, which groups the 500 companies with the largest capitalization in the United States, includes prominent technology companies such as Apple, Microsoft, Alphabet (Google), Amazon and Nvidia, which have experienced notable growth this year. This increase may be due to its focus on AI. However, the risk of recession exposed by the analysts and companies mentioned previously in this article is what could slow down or even reverse the profits of the companies that make up the S&P 500 and Nasdaq. Despite this and with a possible recession in the coming months, bitcoin could face two scenarios: one positive and the other negative. In the positive, Bitcoin could follow its own adoption curve and would positively stand out of a stock market crash, which would impact its long-term value. One possible cause of this is the growing popularity of Bitcoin spot ETFs and the involvement of institutional investors seeking exposure to this digital asset. Since their launch in January 2024, these financial products have had revenues of over $15 billion, an example of the importance that BTC has among traditional investors.
This evolution is taking bitcoin to a new stage of maturity, similar to that of traditional assets such as gold. This means that The market is beginning to recognize bitcoin not just as a speculative investmentbut also as a form of “hard money.” Add to this a cut in interest rates in the United States, and the benefits for bitcoin and other cryptocurrencies increase. Bitcoin, in particular, has been seen as a store of value asset, becoming an attractive option for investors seeking to protect themselves from volatility from traditional markets. This independence from the political and economic decisions of States gives it an advantage, especially in times of financial crisis (such as a recession), where government measures can increase the risk of losses in the stock markets, offering investors a robust alternative in times of uncertainty. In the face of the possibility of a recession in the United States, Bitcoin buying is likely to increase and, therefore, its priceas investors might seek out this digital asset as a safe haven. Likewise, it cannot be ruled out that the possibility of this thesis of a mature bitcoin market is exaggerated. On previous occasions, BTC has had significant price drops caused by negative news. In 2020, for example, its fall was induced by the coronavirus pandemic. In 2022 by the war between Russia and Ukraine. More recently, by conflicts in the Middle East such as the one between Israel and Iran that developed last April. Therefore, the anticipated recession will be a «test of fire» for the digital currency created by Satoshi Nakamoto. There, it will be possible to see what the current state is with respect to market maturity.