As BlackRock sees the recession as a springboard for bitcoin, the Federal Reserve cools the enthusiasm of crypto

Between bold predictions and economic warnings, the market navigates murky waters.

As the shadows of recession lengthen and the dust settles on a turbulent year for bitcoin, the scene is set for an economic drama with the potential for surprising twists.

While crypto behemoth BlackRock is positioning bitcoin as the springboard out of the crisis, the Federal Reserve appears to be cooling the enthusiasm of the crypto universe.

Between bold predictions and stark economic warnings, the market is navigating murky waters.

Why the crisis could be a ‘great catalyst’ for bitcoin

In a statement that has sent ripples through the cryptosphere, Robbie Mitchnick, crypto strategist at BlackRock, recently asserted that a recession would be a “great catalyst” for bitcoin.

An iconoclastic reasoning, to be sure, yet Mitchnick's claim is founded on a deep understanding of macroeconomic cycles and institutional behavior.

Since the cataclysmic events of 2008, which unfolded in the wake of the subprime mortgage crisis, we have witnessed systemic crises often serving to propel alternative assets.

In the aftermath of such crises, governments and central banks typically intervene with large-scale stimulus plans, maintain low interest rates for extended periods, and preside over an explosion of public deficits, ultimately fueling distrust towards fiat currencies.

This scenario, according to Mitchnick, would play directly into the hands of bitcoin, which is increasingly being viewed by investors as an 'anti-crash insurance' policy.

However, this optimistic perspective is also juxtaposed by Mitchnick's own warning of the risks of “social disorder” in the event of a recession—an explosive variable that is often absent from economists' models.

In this instance, bitcoin, a haven in times of chaos, would benefit as the fabric of trust in institutions continues to unravel.

This hypothesis is reminiscent of bitcoin's rise during the 2020 lockdowns, where it surged in response to massive monetary printing and the ensuing economic turmoil.

The implications of Trump's trade policies

On a related note, Larry Fink, CEO of BlackRock, has openly linked the Trump administration's trade policies to a risk of stagflation—a macroeconomic scenario that economists have been warning about for months.

According to Fink, bitcoin could serve as a hedge against this nightmarish scenario, an assertion that has been met with skepticism in some quarters.

This audacious bet comes as the price of bitcoin has dropped to $85,000 after peaking at $110,000 in January.

Despite this decline, bitcoin's volatility remains a constant, even as BlackRock's bitcoin ETFs, which hold $50 billion in assets, attest to the institution's belief in the maturation of the crypto market.

The Fed strikes back: A warning that mull over enthusiasm

In a recent statement, Jerome Powell, chairman of the Federal Reserve, dampened enthusiasm for bitcoin as he warned that the risks of recession had increased but remained moderate.

According to Powell, the US economy was still coping well with the recent series of interest rate hikes, even as inflation remained stubbornly high.

This cautious speech, delivered at an economic summit in France, was heavy with implications. Among other things, Powell stated that the Fed did not plan to be the savior of the economy with hasty rate cuts, especially since the labor market was still strong and inflation was proving sticky.

For bitcoin, which is often boosted by periods of cheap credit, this announcement acts as a brake on its potential for further rally.

Mark Zandi, an economist at Moody's, also weighed in on the matter, asserting that Trump's tariffs on goods from China had served to accelerate an "inevitable" recession.

According to Zandi, the Trump administration's economic policies, which were focused on protectionist measures and trade friction, ultimately destabilized the global economic system.

Furthermore, Clement Bohr, an economist at UCLA, went so far as to say that the Trump administration's actions could lead to a "deep" crisis, especially given the administration's handling of trade disputes and immigration policy.

These alerts, which are being issued by economists affiliated with major institutions, come at a crucial moment, especially considering the recent turmoil in the bitcoin market.

The question that remains is whether bitcoin will ultimately thrive because of crises or despite them.

In this context, bitcoin ETFs appear to be an ambiguous barometer of institutional interest in cryptocurrencies. Despite their meteoric success—amassing $100 billion in assets by November—their growth has slowed since the Federal Reserve's warnings.

It seems that institutional investors, torn between their appetite for bitcoin and macroeconomic caution, are adopting a sawtooth strategy.

Nevertheless, BlackRock, the world's largest asset manager, remains steadfast in its bet on a "recessionary bitcoin," an assertion that continues to defy skeptics.

As this new chapter in the saga of bitcoin unfolds, large investors are