Bitcoin and the US stock market are approaching a crucial turning point. Concerns about a potential recession in the United States are growing, and Donald Trump‘s policies are also contributing to volatility.
“Currently, hard data provides little evidence of a recession. But the market is fragile. If the selling continues, it could trigger a recession. And then prices could fall significantly further,” says Simon White of Bloomberg.
Are Bitcoin and the stock market at a turning point?
To support his turning point thesis, White shares the following chart showing the price performance of the S&P 500. It shows that the US stock market theoretically has a decision to make.
If prices continue to fall, then, according to White, a recession is likely underway. On the other hand, if we see a recovery in the coming weeks, the market could avoid a recession – and it would ultimately have been just a period of fear.
Why can price declines trigger a recession?
Simon White doesn’t provide a more in-depth analysis. He himself points out that the current data does not point to a recession.
Nevertheless, falling stock prices can weigh on the US economy. The reason lies in the so-called wealth effect. A large portion of wealth in the US is invested in stocks. When losses of 20 to 50 percent occur, many people automatically restrict their consumption.
They feel less wealthy and spend less accordingly. This can create a negative spiral in which falling stock prices also drag down consumption.
Such a scenario would be quite bleak for the US economy, Bitcoin, and the stock markets. However, we are not there yet. It’s still too early to talk about a bear market or even worse.
Bitcoin and the S&P 500 are at a turning point. Which way will it tip? Is a recession coming – or will the bull market phase continue?
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