Bitcoin may face short-term pressure despite recession hopes

Bitcoin (CRYPTO:BTC) enthusiasts expecting a bullish impact from a potential recession may need to temper their optimism, according to Markus Thielen, head of research at 10x Research.

In an April 11 report, Thielen highlighted that widening credit spreads indicate deepening recessionary concerns in the economy.

“Expecting a bullish impulse is too early,” he stated, pointing out that while recessions often lead to monetary easing and rate cuts, Bitcoin could face initial headwinds before gaining momentum.

Thielen explained that Bitcoin historically sells off when events like Federal Reserve rate cuts or currency devaluations occur.

“The first cut might not be so impactful and also confirms economic weakness,” he stated.

Meanwhile, White House crypto and AI advisor David Sacks called for a rate cut in an April 10 post on X, citing a year-over-year core Consumer Price Index increase of 2.8%, the lowest since March 2021.

However, the CME Group’s FedWatch Tool indicates a 64.8% chance of no rate cut at the Federal Reserve’s May meeting.

Thielen cautioned that when credit spreads widen year-over-year, Bitcoin often experiences downside pressure and takes longer to recover.

“This pattern suggests that while a longer-term opportunity may emerge, Bitcoin could still face pressure in the near term,” he added.

The U.S. Dollar Index (DXY), which has dropped 2.92% in the past five days to 100.337, further reflects market uncertainty.

Despite these challenges, BlackRock’s head of digital assets Robbie Mitchnick recently stated that Bitcoin could thrive in a recessionary environment, calling it a “big catalyst for Bitcoin.”

While long-term prospects remain promising, Thielen emphasised that short-term volatility is likely as markets navigate economic shifts and monetary policy changes.

At the time of reporting, the Bitcoin price was $81,444.20.