One of the most respected economists in the United States is sounding the alarm about an impending recession, as consumer confidence has plunged and the trade deficit has jumped. This article examines the potential impact of the downturn warning on Bitcoin and leading altcoins, including Chainlink (LINK), Cardano (ADA), and Solana (SOL).
Economist Warns a Recession is Coming Unless One Thing Happens
Mark Zandi, the top economist at Moody’s, a top ratings agency, warned that the US may sink into a recession this year.
He said this after a report by the Conference Board showed that consumer confidence tumbled to 86 in April. That figure was a 19.3 percent decline in the last three months.
Zandi has consistently argued that a 20-point drop in consumer confidence over three months could lead the US into a recession. As such, he still hopes that the country will avoid a recession if the trade disagreements are resolved.
Signs of potential deals with top countries, especially China, will help boost confidence in May and reduce those recession risks.
His statement came as analysts at top U.S. banks predicted that the GDP data due on Thursday will show the economy contracted in Q1. That is after a report showed that the US trade deficit expanded to a record $162 billion in March as companies rushed to buy products ahead of the US tariffs.
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Why a Recession is Good News for Chainlink, Cardano, and Solana Prices
In theory, a recession should be bad for stocks and other risky assets, such as Chainlink, Solana, Cardano, and others. That is because any mention of a recession brings memories of events like the dot-com bubble, the Global Financial Crisis, and the Covid-19 pandemic.
In reality, however, a recession is simply a period when the US economy contracts for two consecutive quarters. In most cases, financial assets like stocks and cryptocurrencies tend to perform well when this happens. A broader market crash occurs when there is a structural issue in the market, such as the banking sector in 2008/9.
A recession could benefit altcoins like Cardano, Chainlink, and Solana by reducing inflation through lower demand, prompting the Federal Reserve to implement more interest rate cuts than anticipated.
Given these circumstances, many Polymarket users believe the Federal Reserve will enact two rate cuts this year, with some anticipating three or four. Cryptocurrency and stock prices tend to perform well when the Fed is cutting interest rates.
The fear of a recession, followed by Federal Reserve cuts, explains why the stock market is experiencing its longest rebound since 2022. In a note, an analyst told Bloomberg:
“Many are still calling for a recession and even lower equity levels, but we think the notion of federal intervention supporting equities and the economy, sometimes referred to as the ‘Trump put’ and ‘Fed put,’ is real. And while tops and bottoms are hard to recognize as they are happening, we think the worst is behind us.”
Therefore, there is a likelihood that Bitcoin and top blue-chip altcoins, such as ADA, SOL, and LINK, will continue to do well this year.
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