Key Points
- Goldman Sachs hints at lowering recession probability to 15% if August jobs report shows strength.
- Uncertainty remains about Bitcoin’s response to these changing macroeconomic conditions.
Goldman Sachs has suggested that the probability of a recession could fall to 15% if the August jobs report, due on September 6, demonstrates continued strength. As signs of stabilization emerge in the U.S. economy, the cryptocurrency market is still fluctuating, leading to questions about how Bitcoin might react to these changing macroeconomic conditions.
Federal Reserve’s Potential Rate Cut
Economists at Goldman Sachs, spearheaded by Jan Hatzius, are growing more confident that the Federal Reserve will slash interest rates by 0.25% in September because of signs of an economic slowdown. However, if the forthcoming jobs report is strong, the Federal Reserve might reconsider or postpone the rate cut.
For Bitcoin, a potential rate cut by the Federal Reserve brings both opportunities and risks. Lower interest rates usually result in a weaker dollar, making Bitcoin a more attractive alternative investment. This could stimulate increased demand for the cryptocurrency.
On the other hand, if the rate cut is perceived as a response to rising fears of an imminent recession, it could create a more cautious market environment. In such a situation, investors might avoid riskier assets like Bitcoin, leading to struggles in its price.
Bitcoin’s Response to Economic Changes
While traditional markets have responded positively to recent economic data, Bitcoin’s reaction has been less noticeable. Over the past week, Bitcoin’s price has remained relatively stable, even as U.S. stocks, especially the Nasdaq, have seen gains of approximately 5%. This divergence underscores a cautious sentiment among cryptocurrency investors, who may be waiting for more definitive signals before making significant moves.
Markus Thielen, Head of Research at 10x Research, informed a popular news outlet that while a rate cut could initially boost Bitcoin, it might also indicate underlying economic weakness that could lead to a market correction. He cited Bitcoin’s performance in 2019 as a warning. That year, Bitcoin surged by 20% following the Federal Reserve’s rate cut in July, only to fall by 35% by the end of the year as economic concerns lingered.
Differing Economic Forecasts and Their Effects
Not all economists agree with Goldman Sachs’ optimistic forecast. Bruce Kasman, JPMorgan’s chief global economist, remains cautious, pointing out signs of weakening labor demand and a slowdown in global manufacturing. Kasman suggests that while the service sector continues to show strength, the overall economic momentum may be slowing down.
JPMorgan has kept its recession probability at 45% through the end of 2025, citing further uncertainties related to the political landscape. Given these mixed signals, the future of Bitcoin remains uncertain, and analysts advise investors and traders to exercise increased caution.
