After Periods of Economic Contraction, Better Times Are Ahead for Bitcoin

Macroeconomic factors wreaked havoc at all levels of the economy and finances of the two world powers; this undoubtedly had to affect the digital financial market.

Cryptocurrencies are digital assets with a relatively high speculative level, which makes the market much more vulnerable to external changes; despite being decentralized this year, they showed a particular vulnerability that caused the price of several digital currencies to collapse. In, you will find the appropriate information.

What is a market contraction?

When talking about market contraction, reference is made to the corrections that can happen in a certain period concerning the behavior of a specific asset’s price.

In this case, we talk about digital assets, the possible corrections that may be generated around the prices, and the potential exit from the crypto winter slowly and progressively.

Various analyzes suggest that Bitcoin had an upward trend that exceeded the expected period since it lasted more than 200 days in this process, and only at the beginning of 2021 was when a price decrease begin to occur that to date can be considered which was quite abrupt since it decreased by around 60% of its value.

The contraction is usually compared to a period of market purge where investors tend to leave when the market goes red; they take their digital assets and sell, leaving only the investors who, despite the unfavorable conditions of the environment, continue to hold their digital currencies.

Long-term investors are not selling their cryptocurrencies, which reveals a compelling reason they are holding their Bitcoin because the global financial picture has not been very optimistic. Yet, they continue to accumulate their cryptocurrencies.

Currently, there is a lot of uncertainty and speculation about the digital market, which leads to the need to continue contracting, hoping to reach a reasonable level that can be called a floor; this could be around $24,000 in the case of BTC.

The headlines around cryptocurrencies are not very positive, but let us remember that everything is due to the fulfillment of the digital market’s financial cycles that occur from time to time. That, according to analysts, is fully complied with.

Possible changes for Bitcoin and cryptocurrencies

The crypto-active market is alert to any change or modification that may be generated regarding the publications of the new economic and political measures in the United States.

Fed recently ruled by reducing the estimated increase for interest rates, this indicator has benefited the cryptocurrency market, keeping the price in a range where it could take the final push to give way to an upward trend.

It is relevant to note that the US employment report also showed a change because there was not expected to be an increase that would double the expected value, which contributed to slightly diminishing the possibility of an upcoming economic recession.

The digital market is attentive to the possibility that inflation will decrease, which would directly impact the pronouncement of September by the Fed, where Bitcoin could reach higher values, reaching a historical maximum by the end of the year close to $50,000.

Various indicators analyzed by financial specialists usually indicate that the economic recession that has been announced may not materialize in 2022; it will likely occur by 2023 since inflation is a factor that plays a vital role since it drives and complicates the economic crisis.

Predicting what may happen in the future is practically impossible; for any statistician or analyst, it is usually easy to analyze and establish the possible scenarios that can be generated in a given period.

Such is the case of Bitcoin, where after its last all-time high, many considered its value would rise to 100,000 dollars per unit of Bitcoin. Still, no one had such a hit economic and financial scenario.


The situation may not be optimal; we must be aware that world economies have been undergoing crucial phases, such as the recovery barely consolidating after the pandemic. 

Everything indicates that we may enter a recession that could positively affect cryptocurrencies; it depends on the economy’s turn and the Federal Reserve’s measures.

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