Advanced Economies Expected to Shrink 35%, Bitcoin Predicted to Grow

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In Brief
  • Goldman predicts a 35% fall for advanced economies in Q2.

  • This is 4x more damage than seen in 2008.

  • Bitcoin is predicted to rise substantially after its halving next month.

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The magnitude of impact that the ongoing COVID-19 pandemic will end up having on the global economy has yet to be seen. It is expected to be a devastating blow and could push the world into a recession or financial crisis when all is said and done. Goldman Sachs Group Inc. has predicted that advanced economies could feel as much as a 35 percent pinch.

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This figure is predicted for Q2 and indicates a 35 percent drop from Q1 of 2020 when the virus was only just starting to take root. The expected fall for advanced economies is massive. In context, this prediction is four times larger than what was seen during the 2008 financial crisis, which previously held the record for this metric.

Meanwhile, the cryptocurrency space and Bitcoin, in particular, are still being predicted to rise even amid the global pandemic for a number of reasons. Bitcoin may have dropped in time with the beginning of the stock market fall in the middle of March, but its correlation with global risk assets is weaker than many think.

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In about a month’s time, Bitcoin will undertake its third mining reward halving. This event will put a strain on the mining efforts of the coin, but if history is anything to go on, BTC is expected to rise substantially in value.

While Goldman is predicting a drastic fall in economic strength, many respected cryptocurrency analysts, commentators, and predictors are expecting an upward trajectory after the May halving date.

Beating the Virus is Costing the Economy

The pandemic looks like it may be peaking globally, which is good news as the next phase will be reducing its impact and trying to restart the economy.

However, as New York-based economist Jan Hatzius wrote in a note to clients: “The improvement [less cases] is probably a direct consequence of social distancing and the plunge in economic activity, and could reverse quickly if people just went back to work.”

This has led to central banks, governments, and policymakers mounting an impressive response to try and prop up the faltering global economy in the meantime — but this too comes with its own set of problems. The Federal Reserve has said it can print ‘infinite amounts of cash’ to provide liquidity, but this can lead to hyper-inflation and the debasement of the dollar.

Better on the Bitcoin Side of Things

Instead of increasing the circulating supply in a time of panic, Bitcoin will be slashing the amount of new coins entering the ecosystem in half. This will lead to a decrease in supply, which should bolster demand, and technically lead to increased price action.

Predictions of where this price will end up vary but most see a substantial rise.

James Todaro, head of research at TradeBlock, predicts a price increase in line with increased mining costs.

Twitter analyst ‘PlanB,‘ who introduced the stock-to-flow model for predicting the Bitcoin price, says Bitcoin needs a monthly capital inflow of at least $400 million per month to achieve a rising price in the long term:

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
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Julian has had a long interest in financial technology, especially cryptocurrency and blockchain. He studied to be a journalist and then decided to marry his passion for fintech with his skill in writing to report on this ever-changing and rapidly moving space.

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