When Will the Long-Awaited Recession Begin?
In this section, we will discuss the indicators and factors that suggest when the long-anticipated recession might occur. One particular indicator, the inverted yield curve, has successfully predicted recessions since 1955.
The inverted yield curve occurs when short-term government bond yields exceed long-term bond yields. This phenomenon has been observed since October 2022. However, it is important to note that despite the ongoing yield curve inversion, the US economy has not yet shown any significant signs of recession.
The current difference between 10-year and 3-month US treasuries stands at 1.22 percent, as shown in the graph above. Although the difference has slightly decreased in recent months (the green line has risen slightly), this can be seen as a “re-steepening” of the yield curve, indicating a return to normalcy. In the past, recessions have typically begun when the green line crossed above the zero mark. To determine the beginning of a recession, it is crucial to closely monitor US interest rates, which we regularly do on the Premium Discord of CI.
Implications for the Bitcoin Price
If the inverted yield curve dissipates in a few months, as history suggests, a recession may be imminent. Traditionally, recessions have not boded well for the bitcoin price, and current price action seems to align with this trend.
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For several weeks now, many have questioned why bitcoin has struggled to regain its bullish momentum despite positive news. The answer likely lies in these macroeconomic developments. Currently, investors can earn a 5% return on US treasuries, while the looming threat of a recession poses risks to bitcoin and other high-risk assets. Consequently, the challenging period that bitcoin is currently experiencing is not entirely surprising.