The IMF has predicted that Bitcoin (BTC) is at greater risk as a major global economic recession may be expected in 2020.
April 15, 2020 | AtoZ Markets – The International Monetary Fund (IMF) has made its economic predictions for the “Great Lockdown 2020.” The fallout will be “far worse” than the financial crisis of 2008, and “the worst recession since the Great Depression.”
Global growth will shrink to minus 3% in 2020, predicts IMF
On April 14, the IMF published the quarterly World Economic Outlook report. The report described the COVID-19 induced lockdown as the worst economic downturn. The report also contains the IMF’s prediction of a total of nine trillion dollars of losses by 2022.
IMF warns that this is a major downturn and the report’s growth estimate shows that the economy has fallen by 6.3% since January. The IMF has also predicted a year-over-year recession of 3% as the economic activity retraces in more than 170 countries.
The Director of the Research at IMF, Gita Gopinath, talked about the prediction and said that it was based on the assumption that “the pandemic and required containment peaks in the second quarter for most countries in the world, and recedes in the second half of this year” and said that the growth forecast was a major revision over a very short period. Gopinath noted:
“This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis.”
The IMF is more optimistic about 2021, predicting a 5.6% global recovery. But if the pandemic continues into 2021, global GDP will fall by an additional 8%.
How could the enormous monetary disaster hurt Bitcoin?
Bitcoin, which was born over the last international monetary disaster of 2008, will face an unprecedented problem to show that it meets its main goal. Bitcoin’s already been shown to track major global indices. Last month, Bitcoin’s price halved in a matter of days when the stock markets crashed.
Noted sell pressure in these bearish markets continued until March 23rd. Thereafter, the buyers resurfaced and the top U.S. stock indexes pushed Wall Street into bull market territory again. It was one of the fastest bear-to-bull reversals in history. Moreover, this comes almost inexplicably as COVID-19 is far from totally contained in the world, uncertainty abounds, and the pandemic’s challenges to healthcare systems and economies remain massive.
Indeed, in late March, BTC reached an unprecedented level of correlation with the major S&P 500 stock index. This correlation wavers has varied over time, and surely won’t be there forever. However, amid the current economic climate it shows investors are generally trading top risk-on assets in the same way.
That means Bitcoin seems primed to track Wall Street for the foreseeable future, whether bearish or bullish. Nevertheless, Bitcoin could suffer if further COVID-19 waves necessitate longer societal containment practices.
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