- US Secretary Scott Bessent claimed that the 43-day government shutdown didn’t catalyze recession risks.
- Bitcoin has exhibited peculiar behavior during an economic recession.
The US economy reportedly suffered an $11 billion “permanent hit” during the government shutdown. However, Treasury Secretary Scott Bessent assured the public that the 43-day pause in federal operations didn’t pose a risk of recession.
US Economy Not at Risk of Recession
The White House cabinet member earlier admitted that parts of the economy, particularly the housing sector, were in recession. Nonetheless, he clarified that there were no signs indicating that overall economic growth was going downhill.
Additionally, Bessent had shut down claims that President Donald Trump’s aggressive tariffs were the reason for the underperformance of the US markets and inflation. He argued that the problem lay in the service economy.
The Treasury secretary highlighted that the president has been pushing for lower energy prices since his campaign. He believes it could be the key to jump-starting a positive economic activity. The official also reiterated Trump’s call for lower interest rates to pump up consumer spending.
“I am very, very optimistic about 2026,” Bessent told the press. “We have set the table for a very strong, non-inflationary growth economy.”
The Dance of Recession and Bitcoin
Bitcoin (BTC) and other large-cap cryptocurrencies tend to exhibit peculiar behavior during a recession. This was illustrated at the onset of the COVID-19 pandemic and the ensuing macroeconomic distress during its long stretch.
Over the past couple of years, Bitcoin has shown sensitivity to fluctuations in risk assets across traditional capital markets, especially tech stocks. With that, confirmation of a recession could immediately prompt risk-averse BTC and crypto holders to reduce or sell their supply. The expected margin calls could amplify the deep correction in these digital assets, completely ignoring Bitcoin’s “digital gold” and “safe haven” narratives.
On the contrary, Bitcoin’s momentum typically gains traction amid prolonged economic pressure. The central bank’s general response to a recession usually involves lower interest rates and liquidity injection via quantitative easing and stimulus packages. The mentioned factors’ tie-in with BTC’s “digital gold” status could reinforce its long-term appeal as an inflation hedge and an alternative store of value outside the traditional, centrally controlled financial system.
In short, a recession could initially act as a headwind for Bitcoin and crypto, driving their values to massive corrections. However, the aftermath could turn things around for them, making the long-term tailwind a catalyst for rallies and potential pumps to new all-time highs.
