Bitcoin in danger as IMF warns of worst slowdown in 90 years


The International Monetary Fund (IMF) has released a brutal forecast that the unprecedented global economic slowdown triggered by the “big lockdown” will get worse before it gets better.

With Bitcoin (BTC) experiencing record correlation with traditional markets, the cryptocurrency must detach from the S&P 500 if it has a chance to produce the bull run after the much anticipated half expected.

IMF cuts estimate of global growth by 6.3%

On April 14, the IMF released its quarterly report on the outlook for the world economy, describing the COVID-19 freeze as the worst economic slowdown in 90 years and predicting a total of $ 9 trillion in losses. here 2022.

The report’s estimate of growth has declined 6.3% since January, predicting a year-on-year recession of 3% as economic activity declines in more than 170 countries.

IMF Research Director Gita Gopinath said the forecast was based on the assumption “the pandemic and containment peaks required in the second quarter for most countries in the world, and will decline in the second half of this year And said the expected growth was a “Major Revision over a very short period”:

“This makes the Great Lockdown the worst recession since the Great Depression, and much worse than the global financial crisis. “

The 2008 financial crisis saw global growth of 0.1% growth over 12 months from the start. However, this current crisis has an immediate impact on China and India. The IMF is more optimistic about 2021, predicting a global recovery of 5.6%.

Impacts of the Great Lockdown 2020 and the 2008 global financial crisis on regional economies. Source: IMF

IMF predictions are bad news for Bitcoin

The outlook for the International Monetary Fund for the global economy can be a bad omen for the Bitcoin and cryptocurrency markets, as the BTC has recently produced a record correlation with the S&P 500. Although it is not clear how traditional markets will react if the crisis deepens, the history of the main financial crises suggests that they must fall further.

According to data released on April 14 by Coinmetrics, the market turmoil in mid-March saw Bitcoin in record correlation with traditional markets. While the confluence seemed to normalize briefly towards the end of March, beginning of April, the correlations rebounded and approached the record levels of last month.

Record high correlation between gold and BTC

However, the immediate liquidity crisis appears to have led to a confluence in most asset classes – with a correlation between the S&P 500 and gold reaching its highest level in half a decade, while the confluence between Bitcoin and gold sets a new record.

Correlation between Bitcoin and gold. Source: CoinMetrics

Gold performance during the GFC could be instructive. While the initial liquidity crisis caused the price of gold to drop 30% in the first six months of the 2008 crisis, gold recovered to gain 150% in the next three and a half years.

If history repeats itself, Bitcoin will have to shake off its confluence with traditional markets and evolve at the same rate as gold to produce the uptrend post-halved.

Coinmetrics said that in the long run, the correlation between Bitcoin and the stock market should disappear:

“Although correlations have recently reached historic highs, it is unlikely that Bitcoin and S&P 500 correlations will remain high in the long term without major changes in the fundamentals of one or both markets. “


Please enter your comment!
Please enter your name here