The US 10-year and 3-month yield curve is at historic, yet concerning, low. Analysts from traditional finance and cryptocurrency are speculating whether this anomaly, which in the past has always predicted a recession, will hit this time as well. The 10-year 2-year yield curve has displayed a negative divergence from the 10-year 3-month yield curve and the latter is now pointing to a possible recession. While only time will tell for certain when a recession will hit, the past indicates that it may happen a few months after the yield curve starts to flatten.

Scenarios vary when it comes to predicting how a recession would affect financial markets and Bitcoin. Jurrien Timmer, director of global macro at Fidelity, wrote that in the past traditional markets experienced drawdowns ranging from -11% to -51% right after the yield curve showed a negative divergence. As for Bitcoin, it is still unclear how it will react, but according to many analysts a recession could lead it to a sharp downturn. For the time being, Bitcoin is rallying, with the price currently hovering around $30,000.

Whether a recession will really hit and how severe it will be depends on the CPI figures released today and the FOMC minutes. It is clear is that the yield curve has reached a historic level that should not be taken lightly. Investors in traditional and cryptocurrency markets alike should remain vigilant and monitor the situation closely.



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