Goldman Sachs Reduces US Recession Risk to 20%: Implications for Bitcoin

Economists at Goldman Sachs have revised their projected probability of a recession occurring in the United States in the coming year to 20%. This adjustment follows recent data from retail sales and employment statistics, which may positively influence Bitcoin traders.

Current Economic Insights

In a report dated August 17, Goldman Sachs economists, led by Jan Hatzius, have reduced their recession probability estimate from 25%. The team noted that this figure could be adjusted to 15% pending positive outcomes from the upcoming jobs report scheduled for September 6.

The analysts expressed increased confidence that the Federal Reserve might implement a 0.25% interest rate cut during their September meeting. They also cautioned that a disappointing jobs report could prompt a more significant 0.5% cut.

The stock market experienced a noticeable increase recently, driven by retail sales data in July that exceeded analysts’ expectations. Additionally, recent Labor Department figures indicated a drop in new unemployment claims, marking a one-month low.

Impact on Bitcoin

Analysts are weighing the significance of Goldman’s lowered recession odds. For instance, IG Markets analyst Tony Sycamore characterized this adjustment as a minor change that is unlikely to trigger widespread risk-seeking investment, including in cryptocurrency.

Markus Thielen, head of research at 10x Research, opined that while Bitcoin traders might welcome a potential rate cut, there is also the possibility that it signals an incoming recession, which could lead to a downward correction in Bitcoin prices, similar to market trends observed in 2019.

Historically, in July 2019, an interest rate cut by the Federal Reserve led to a 20% surge in Bitcoin prices. However, by the end of 2019, even with subsequent rate cuts, Bitcoin had dropped 35% from its peak following the first cut.

Notably, not all economists share Goldman Sachs’ optimistic perspective. In a note from August 15, JPMorgan raised its estimate of the likelihood of a US and global recession occurring before year-end to 35%, a notable increase from the earlier forecast. Chief global economist Bruce Kasman highlighted signs of weakened labor demand and the potential for declining activity in the manufacturing sector, although there are some positive signals from the service sector.

JPMorgan continues to project a recession probability of 45% by the end of 2025, factoring in additional uncertainties related to the current political climate.

• Goldman Sachs: Recession probability now at 20%
• Upcoming jobs report: Critical for economic forecasts
• Potential Fed rate cut: Could impact Bitcoin trading sentiment
• JPMorgan: Increased recession probability to 35%