What to Do During Crypto Recession?
Bitcoin is the most popular cryptocurrency in the world, with nearly half a million transactions happening every day. The cryptocurrency was introduced in 2009 when the world was undergoing a financial crisis. More than 10 years later, it has gained massive traction, triggering the development of other digital tokens.
The market value of the cryptocurrency market is rated at almost 1 trillion EUR. However, crypto investors and holders are worried about the possible crypto recession. Also, if you are interested, read more about most undervalued crypto.
The world is facing massive falls in the crypto market. Many are concerned about whether Bitcoin and other digital tokens will survive if the world goes into an economic recession. Crypto holders and investors are now looking for assets to save them from a possible stagflationary environment (read more – best cryptocurrency to invest in crypto winter).
The crypto market hasn’t been used long enough for financial experts to predict its behaviour should the world plunge into a cryptocurrency recession.
A cryptocurrency recession is defined as a period where digital tokens experience a continuous drop in market prices. Various economic factors can trigger the crypto recession.
Cryptos’ performance during a recession depends on the type of recession. During a financially triggered recession, cryptos are most likely to perfume exceptionally well compared to an economic recession. During a recession, cryptos are likely to be negatively affected like the other assets and experience a continuous drop in market value.
Cryptocurrencies are digital assets; like other assets, they are affected by any economic recession.
Staying calm during a recession is very important for financial and mental well-being. Focusing on long-term financial goals and diversifying your investment portfolio will help you stay calm during a recession. Experts also recommend limiting the time you spend checking your investment portfolio or following current updates on market prices. Frequent updates on market prices can trigger anxiety and depression.
Investing during a recession greatly depends on one’s financial position and long-term goals. Investors with stable financial positions and extra cash during a recession can invest in crypto. If you don’t have a solid emergency fund, avoiding any investment options during a recession is best.
It’s tough to say, but signs point to the fact that cryptos are likely to survive a recession. Digital tokens have been around for over a decade, experienced severe economic hardships, and still managed to bounce back. While recovery from a recession can take some time, crypto experts predict an impressive recovery of digital tokens from any recession.
Nevertheless, there have been periods of poor market performance in the crypto market. Experts use these instances to predict the behaviour of crypto during recession. Most assets tend to be affected during economic recessions and start losing their value.
In this detailed guide, we want to cover in-depth crypto recession and what you can do to protect your digital tokens. The information is well researched, and our experts have many years of experience in monitoring and analysing the cryptocurrency market.
What is Crypto Recession?
According to the National Bureau of Economic Research (NBER), a recession refers to a significant decrease in economic activity spread across a given economy and lasts for more than a few months.
Cryptocurrency experts describe the crypto recession as a time of decreasing momentum in the crypto industry, and also refer to it as crypto winter. They can also predict a possible crypto recession and behaviour of cryptocurrency during recession by analysing recession indicators.
For several years there has been an increasing market value of various digital tokens, with bitcoin taking the lead. Their prices skyrocketed when they attracted more users in various sectors like online gambling. If more people move away from digital currencies, they might drop in market price and never return to their former glory.
However, experts are optimistic that the cryptocurrency recession period won’t last for long. Even though digital tokens continue experiencing a dropping market price, there is hope that they will recover.
Main Recession Indicators
Recession indicators refer to economic indicators which contain information showing the likelihood of a recession occurring. Experts can also use them to determine the severity of a current recession. Economic experts can use variously calculated and reported statistics when examining an economic recession. They can also use proprietary models to predict a possible recession.
Recession factors measure factors that affect the economic health of the world or a country. Some indicators indicate an oncoming recession, while others indicate an ongoing recession. There is no one specific set of specific indicators that can guarantee 100% the presence or possibility of an economic recession.
They cover different aspects of an economy, from sales and employment to financial markets and manufacturing. Below are the top recession indicators to watch out for:
- The Yield Curve
- Gross Domestic Product (GDP)
- Confidence Indexes
- Real Income
- Recession Probability Model created by the Federal Reserve Bank of New York
- The Stock Market
- Housing and Households
- Leading Economic Index (LEI)
When Does a Recession Start?
An economic recession lasts for six months or even more. Most economic experts identify the start of a recession by observing two consecutive quarters of decline experienced in a country’s GDP. A recession triggers unemployment, consumer demand, and economic output decline.
The duration of a recession is measured from the prior expansion’s peak up to the economy’s downturn trough. It can take an economy many years to recover from a recession.
What To Do With Crypto During Recession?
Crypto holders and investors are confused about what to do with the ongoing decrease in the market price of most digital tokens. Some experts predicted that the cryptocurrency bear market prices would rise during the recession.
Cryptocurrency in a recession, like other assets, is either positively or negatively affected by the recession. There are different actions that crypto holders and investors can take, depending on various factors.
Sell or Buy During a Recession?
During a recession, most assets lose their value. Many investors are considering selling their assets, especially cryptocurrency, to save money. On the other hand, some investors might consider the low market prices of assets as a golden investment opportunity. Recessions don’t last long, and buying assets can be a worthwhile investment.
Investors should buy assets during a recession only if they have enough emergency savings or extra cash. If you don’t have a solid emergency, you might suffer economically during and after the recession. Recession and cryptocurrency is a dilemma for most crypto investors, whether to buy or sell their tokens.
Buying during a recession is effective for investors who don’t plan on touching their investments for at least seven years. While a recession can last months, recovering from a recession can take several years, ample time for you to reap returns from your investment. A long-term investment strategy is very effective during a recession period.
With a strong financial position, strategic approach, and attitude, you can buy during a recession and make impressive returns in the future. If you face financial challenges during a recession, it’s best to sell and avoid buying assets.
How to Stay Calm During a Recession?
A recession triggers asset volatility, causing many investors to have constant fears of waking up to heavy losses. Since you can’t control the behaviour of crypto and recession, the option is to keep calm. You can use the following tips to stay calm during an economic recession.
- Focusing on your financial goals: If you are investing, it’s important to prioritise your long-term financial goals.
- Avoid checking frequent updates on market prices. During a recession, there are frequent fluctuations in the market prices of assets, which can trigger anxiety. Don’t get distracted or waste time checking current events and updates on the market prices.
- Diversifying your investment portfolio: Spreading your investments across different assets will help limit any possible losses. Each asset will perform differently during a recession. While some might lose value, others can gain value.
- Avoid frequently checking your investment portfolio. Limiting how many times you check your investment portfolio is key to maintaining a healthy emotional and financial wellbeing.
How to Make Money When the Economy is in a Recession?
Is it possible to make money during a crypto recession? Yes. There are several ways that a crypto holder can still make passive income from his crypto in a recession. Below are some of the tricks cryptocurrency holders can implement to gain extra income from their tokens:
- Staking is a way of earning crypto holders by holding a certain amount of digital tokens. The rewards are provided to crypto holders after validating blockchain operations. Staking can be done by third parties, on exchange platforms, or staking pools.
- Scalping involves making multiple trades in a day and making minor profits from each trade. It’s an effective short-term trading strategy. Scalping is very effective due to the volatility of cryptocurrencies.
Every financial strategy you employ during a recession must be well thought over. It’s critical to consider your financial position and goals when picking any crypto and recession strategy.
Best Cryptocurrency to Buy During a Recession
During a recession, cryptocurrency prices are likely to fall, just like most assets. Hence investors can buy the digital tokens at a lower market price. However, not all digital tokens offer the best investment option during a recession.
Investors can consider small investments in the cryptocurrency world. The recent developments in the cryptocurrency world over a possible recession of the US economy have shifted the interest of investors. Below are the best crypto for recession for crypto investors.
Bitcoin has continued to hold a steady market price despite reports of possible recession by the U.S. Bureau of Economic Analysis. Even though cryptocurrency has experienced a decline in price for the past 12 months due to various global economic factors, it is still steady. Many bitcoin holders and investors wonder if the top cryptocurrency has bottomed out.
Most bitcoin holders who bought the token before the Covid 19 pandemic have experienced massive losses. Potential bitcoin investors also hope they will successfully target when BTC bottoms out, and they can make huge purchases. However, such predictions of a bitcoin recession are hard to determine. Short-term investors of BTC have incurred great losses compared to long-term investors of digital tokens.
The 2020 recession will be bitcoin’s first recession, with most crypto analysts and experts very optimistic that the world’s most valued digital currency will survive the recession. After the U.S. Bureau of Economic Analysis announcement regarding a possible USA recession, Bitcoin had the highest market price in seven days. The reaction made many investors consider BTC a possible investment option should a recession occur.
The market price of Ethereum had the same reaction as Bitcoin from the announcement by the U.S. Bureau of Economic Analysis regarding a possible USA recession. ETH reported a 16% increase in the market price less than 24 hours after the announcement. Ethereum is the world’s second most popular digital token.
ETH still stands as one of the best cryptocurrencies to invest in even during an ethereum recession. The altcoin was also negatively affected during the Covid 19 global pandemic, with ETH holders experiencing massive losses due to the plunging market price.
ETH holders are also anxious about the possible merger, which changes the blockchain from the PoW (proof-of-work) system to the PoS (proof-of-stake) mechanism. Block time will be reduced to 12 seconds, from the previous 13 seconds, after the merge. The merger is meant to improve the efficiency of the altcoins and their holders.
Crypto Recession Prediction
The cryptocurrency market has never experienced any recession, therefore there is no cryptocurrency recession proof or data. Its current reaction to a possible recession of the US economy has been very positive.
BTC and ETH experienced a 10% and 16% increase in market price, respectively. Other digital tokens, like Cardano’s ADA, Polkadot’s DOT, and Solana’s SOL, all experienced an increase in their market prices during the crypto in recession phase.
While many experts are cautious not to easily conclude the recent response of the cryptocurrency reaction to the possible reaction, many advise investors to consider key macroeconomic factors before investing. The market price of digital tokens can easily be affected by the next steps taken by the USA Fed regarding the technical indicators of recession.
When Does the Cryptocurrency Recession End?
Recessions last for at least six months. However, with the correct measures and policies, governments can shorten the duration. It’s hard to predict when a possible cryptocurrency recession will end. Many factors trigger a recession, and they all play a crucial role in ending an ongoing recession.
The world is experiencing increasing inflation, triggered by the Covid 19 global pandemic. Recent reports show the U.S. economy contracted in its second quarter, which triggered a positive response in the cryptocurrency market. The altcoin market has never experienced any recession, and predicting the outcome of a crypto recession is based on professional and expert analysis of the market.
As the world braces for a possible recession, the cryptocurrency market seems to be a better investment option for long-term investors. However, investors need to be extra cautious and keen other key macroeconomic factors when considering an ideal investment during a recession.