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Cryptocurrency traders are experiencing tough times alongside the rest of the world. BTC hovers around $84,000. Major U.S. tech companies like NVIDIA struggle to make sales while facing threats of new penalties from the European Union. Trump’s perplexing statements and subsequent retractions indicate a rush toward recession in the midst of this uncertainty. This is not a favorable scenario for cryptocurrencies.
The World is Entering Recession
The term recession struggles to describe the current economic downturn. If Trump maintains his stubborn stance, this could lead to a global depression, representing one of the most significant downturns since the Great Depression.
WTO President Ngozi Okonjo-Iweala warns that nations may have to choose sides amid growing tensions between China and the U.S. While Trump confronts the world with tariffs, demanding submission, China seeks to expand its trade partnerships through new agreements.
Following U.S. tariffs and China’s retaliatory taxes, tariffs have surged by nearly 245%. Trump’s recent statement implies, “You can either be with us or with China,” further substantiating the WTO President’s concerns.
The heightened tensions could potentially decrease global real GDP by 7%, a risk the WTO has labeled as “global recession risk.” While rates may exceed 200%, they become meaningless after reaching a certain point, bringing trade with China almost to a standstill.
WTO President highlights that developing nations are particularly vulnerable during this process. Established post-World War II with 166 members, the WTO is increasingly being disregarded by the Trump administration, which initiated departures from the WHO and the Paris Agreement, signaling a lack of commitment to the WTO as well.
Recession and Cryptocurrencies
Recession leads to reduced growth, lower consumption, rising inflation, soaring unemployment, factory closures, decreasing labor needs, and collapsing markets. This situation poses serious risks not only for the U.S. but also for smaller countries facing significant economic turmoil.
In a global recession, individuals will prioritize basic needs like food and shelter over cryptocurrencies. This challenging period could potentially escalate into a global hot war, making it hard to assert that cryptocurrencies will remain unscathed during such turmoil.
What lies ahead? Trump must soften his approach and negotiate deals to stabilize the situation, possibly claiming a false narrative of victory. Following his firm stance in March, his recent comments imply a need for cooperation, particularly after his dealings with Ukraine’s president have raised doubts about the U.S. as a reliable strategic partner, ultimately benefiting China. In summary, the U.S. must seek compromise within the next one to two months to alleviate larger issues, potentially allowing cryptocurrencies to rise amidst these challenges.
