Bitcoin’s Potential Amidst Recession, According to Macro Expert
Jurrien Timmer, the Global Macro Director at Fidelity Investments, believes a recession could trigger a significant Bitcoin (BTC) rally.
He emphasizes that Bitcoin‘s potential for substantial gains is tied to a decrease in high interest rates. Timmer explains that for Bitcoin to thrive, the macroeconomic landscape must shift from being restrictive to accommodative.
What will keep driving it? First, the macro narrative needs to change from restrictive to accommodative. Below is a regression model that lays out a price band based on a typical adoption curve and a range of real rates (from -2% to +2%). /3 pic.twitter.com/HSvVVzkMPN
— Jurrien Timmer (@TimmerFidelity) September 29, 2023
He presents a model based on Bitcoin’s adoption rate, paralleling the internet’s past adoption curve, and considers real interest rates ranging from -2% to +2%.
Timmer’s model suggests that Bitcoin may reach around $45,616 by the end of 2025, but with lower interest rates, it could soar to $96,210 before the same deadline. He also speculates that a recession could lead the Federal Reserve to pivot, making investors turn to safe-haven assets like gold and Bitcoin.
In Timmer’s view, Bitcoin could offer returns uncorrelated with traditional markets in the next cycle. Bitcoin’s correlation with equities has decreased, and its volatility has lessened from 85 in 2021 to 55. The 12-month correlation with traditional markets has fallen from 65% to 7%.
Timmer contends that for Bitcoin to reach new highs, the Federal Reserve must inject liquidity as it did during the Covid-19 pandemic through quantitative easing. He notes that gold and Bitcoin have historically benefited when the money supply grows faster than its long-term growth rate.
Bitcoin is trading at $26,931, reflecting a 0.5% decline in the last 24 hours. Timmer’s insights suggest that Bitcoin’s future trajectory is closely tied to macroeconomic shifts and interest rate dynamics.