A recent chart published by the Federal Reserve Bank of St. Louis indicates that the total mortgage debt within the United States declined between 2008 and 2013, yet just one year later, the trend would reverse, leading to the exhaustive debt level of 2018. Household mortgage debt is considered to have been a key player in the 2007 stock market crash and the Great Recession. At the start of the century, the Federal reserve chopped up interest rates for banks, prompting a surge in moneylending to candidates who would otherwise be unfit for such a boon. Many of these subprime morrtgages caused Lehman Brothers to crash in September 2008, the warning bell for the Great Recession.
According to beincrypto.com’s report, economists and analysts have also been watching other factors that might clue in to an imminent recession; inverted yield curves have been one of these factors. Indeed, each off the nine recessions since 1950 was signaled by a sustained period of negative or inverted yield. 2019’s yield curve reached its lowest level since May 2007. Between the erratic political tension between the United States and the international community, many are predicting economic turmoil to be a “when,” rather than an “if.”
Cryptocurrencies, on the other hand, have enjoyed success and stability despite these harbingers of financial woe. In 2019, right as a trade war was escalating between the nations of China and the United States of America, many Chinese investors changed their portfolios from traditional finance to cryptocurrency. This massive shift allowed Bitcoin’s price to surpass $10,000 for the first time in over a year.
Most digital currency is immune to geopolitical chaos thanks to its decentralized, borderless nature. This means that it can be traded at the same price regardless of location. Effectively, Bitcoin is appealing to investors because they can use it as a bank as well as a backup currency.
When one considers that Bitcoin, the planet’s first cryptocurrency, was born out of the chaos and tumult of the 2008 financial crisis, it is unsurprising to hear that it is being deemed as a safeguard against future crises. Something else to bear in mind is that while things may seem somewhat dicey, predictions are not the same thing as a guarantee. Even the yield curve that analysts are basing their predictions upon has not been followed by a recession for up to 50 months-as was the case in November of 1965.
