JP Morgan, the Wall Street giant produced a model that claimed that the U.S. market has a 60 percent chance of entering a recession over the next two years. When the report was circulated, on unanimous question arose about the impact of the recession on the Cryptocurrency ecosystem.
According to the report published by Bloomberg, the model predicts a 28 percent chance of a U.S. recession over the next year. Though the figure rises to about 60 percent over the next two years. More troubling is the impending recession chances reaches 80 percent within the next three years. Clearly, the institutional giant is indicating that a recession is around the corner.
The model by JPMorgan did not specify the magnitude of the recession and its subsequent effects in comparison to that of the 2008’s meltdown of both the traditional stock market and that of the U.S. housing market. It can be inferred that a recession will affect numerous sectors including cryptocurrency. The model included:
“indicators ranging from consumer and business sentiment to prime-age male labor participation, compensation growth, and durables and structures as a share of gross domestic product.”
Upon comparing, JP Morgan derived a more pessimistic figure of 28% chance in comparison to the Federal Reserve Bank quoting it only a 14.5 percent. However, the former sentiment albeit sad is being echoed by numerous economists, concluding that a recession is likely to occur by 2020. According to the Federal Reserve Bank of Atlanta, two out of every three business economists in the United States expect a recession to occur by the end of 2020, citing trade issues as the trigger for it.
Affect on Cryptocurrencies
The traditional financial markets haven’t accepted or trusted the cryptocurrency ecosystem as an alternative investment. Entering into its eleventh month of an ongoing bear cycle, after a bullish run at the end of 2017, the cryptocurrency assets and blockchain technology has been steadily gaining general recognition.
More and more financial institutions are planning to barge into the crypto – space with multiple product offerings. The impending decision of the Securities and Exchange Commission(SEC) over the Bitcoin Exchange Traded Funds, by the end of the year, an influx of institutional investors could be expected. Moreover, the market already observes the inclination of giants like Goldman Sachs, Citibank, and Morgan Stanley.
It can be predicted that the institutional investors could be looking at a potential switch into the cryptocurrency markets as a safety measure against the upcoming volatility of traditional markets.