In the often turbulent times of an economic recession, the stock market is usually the first to be exposed to a downturn. The S&P 500, an index that measures the stock performance of leading 500 companies listed on the US stock exchanges, is down 30% in the past month and the Dow Jones index price decreased over 33%.
In response to the huge market crash, the effective federal funds rate was cut 100 basis points, which is even greater than what we saw in the 2008 financial crisis, when they cut 75 basis points.
Historically, in most cases, gold prices grew during the stock market crash. Gold is considered to be a hedge against economic crises, however it doesn’t always work out well. In the past week, we have seen the gold price falling over 10%, but investors shouldn't panic because of the initial decline. Eventually, the price of gold tends to rebound and rise, while the stock market keeps plunging.
Unlike gold, we have yet to see how the crypto market behaves during the severe market recessions and we have no previous historical data to rely on. The creation of Bitcoin (2009) was a result of the anonymous founder of the network, Satoshi, being unhappy with the economic situation at the height of the recession.
When the traditional financial system, banks and corporations are faced with an inevitable downturn, investors will seek alternative assets like gold and cryptocurrency to invest in order to minimize the immediate threat to their financial situation. When the bitcoin price increases and exceeds $10,000, people start to wonder, is it too late to buy?
When Opportunity Comes Knockin’
It’s not all doom and gloom. Why don’t we look at the current situation as an opportunity to buy BTC at a significantly lower price now when it's below $6,000.
It might be a good time to start building a crypto portfolio and be prepared for major changes in the financial world in the upcoming years. If you’re just starting out, why not head to our Bitwala Academy and brush up on your crypto knowledge before diving in.
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