In the latter half of July 2022, Bitcoin’s price continued to increase by 4% despite a negative report on the U.S. Gross Domestic Product (GDP). Compared to expectations for a 0.5 percent increase, the quarterly growth rate decreased by 0.9 percent. The decline makes this the second quarter in a row with negative GDP growth. This has indicated an impending economic recession.
Recession in the U.S.
The previous quarter’s 1.6 percent decline and failed forecasts for a 0.5 percent gain in growth were followed by the negative 0.9 percent reading. Bond markets were less confident, and an inverted yield curve emerged as the yield on the two-year Treasury note exceeded the yield on the 10-year Treasury note. When the yield curve is inverted, interest rates are such that long-term debt instruments of the same credit quality yield less than short-term debt instruments. Buying Treasury bonds is effectively lending money to the American government with the hope that it would be repaid with interest. Such conditions have historically signaled the beginning of a recession in the United States.
Following the release of poor economic news, asset prices have increased, suggesting that the Federal Reserve may take a more gradual approach toward decreasing inflation and may implement policies that support asset values.
In the meantime, a Commitment of Traders (COT) report reveals indications that investors are boosting their long positions in bitcoin. The report, which is released by the Commodity Futures Trading Commission (CFTC), gives a weekly snapshot of the holdings held by traders in futures markets.