The fear of a recession under Donald Trump’s potential policies is making headlines, but what does this mean for Bitcoin? Let’s talk about the economic rollercoaster we might face and how the king of cryptocurrencies could react.
Inflation has been beating on America for the better part of three years now. The Federal Reserve is expected to cut interest rates soon.
Federal Reserve Chair Jerome Powell. Credits: Reuters
The inflation recently cooled to 2.6%, just a bit above the Fed’s 2% target. The labor market also calmed down, returning to pre-pandemic levels. High prices and borrowing costs have slowed consumer spending, easing price pressures.
But the Fed warns they’re walking a tightrope. As San Francisco Fed President Mary Daly said:
“We don’t want to be to a point where we start to see the labor market weaken substantially—to falter—because by then, it is actually often too late to bring it back.”
The economic side effects of Donald Trump
Democrats have been proud of the strong U.S. economy, boasting about low unemployment and nearly defeating inflation. However, Trump supporters see a different picture.
While Americans are still paying more for goods than before the pandemic, Trump’s plans could undo all the progress.
Bloomberg economists warn that his policies, including more tax cuts for the rich, increased tariffs, and immigration curbs, could wreak havoc on global trade and spike inflation again.
Trump’s tax cuts are expected to benefit the wealthy even as JD Vance’s presence could sway things a bit. Trump’s tariff hikes might start another trade war with China, which would hurt global trade.
Additionally, the GOP’s full-on ban oon immigration could reduce the labor force, causing further economic strain. This combination of policies could lead to a recession, despite Jerome Powell’s efforts.
Will Joe Biden step down?
Political observers are also buzzing with questions about Biden’s re-election bid. The 81-year-old man is currently facing a lot of pressure to drop out, especially after Trump beat him in the debate, survived an assassination attempt and then accepted the Republican nomination in Milwaukee.
But oh no Biden insists he can beat Trump again. He calls him a threat to American democracy. Trump’s response to that was this:
But Biden has done nothing to convince his party. The Democratic National Committee has delayed the official roll call vote for Biden’s nomination until at least August 1.
And the longer this drags on, the harder it will be for any new nominee to get ready for the general election campaign. Even if that nominee ends up being Kamala Harris.
What happens to Bitcoin in a recession?
So, if Trump’s policies trigger a recession, what happens to Bitcoin? The impact could be complicated. Sure Bitcoin is often seen as digital gold, a safe haven during economic downturns. If investors look for alternatives to traditional assets, Bitcoin might see a surge in demand.
BUTTTTTT, a recession could bring in more market volatility. Investors might sell off Bitcoin to cover losses in other areas, causing some intense price fluctuations.
Donald J. Trump. Credits: The Trump Campaign
Trump’s administration has been more crypto-friendly compared to Democrats. But recessions often lead to tighter regulations as governments try to stabilize economies. This could affect Bitcoin’s growth and adoption.
Bitcoin has shown resilience and growth during times of economic uncertainty. Recently, its value surged amid speculation about a potential Republican victory, seen by many investors as positive for cryptocurrencies.
Source: TradingView
Bitcoin jumped to $62,400 from around $57,000 in under forty-eight hours thanks to increased market optimism related to Trump’s candidacy.
