Bitcoin’s price has dropped about 20% from its peak, sparking concerns about a potential recession. However, macro analyst Tomas (@TomasOnMarkets) isn’t convinced things are as bad as they seem.
Economic Indicators Show Stability
Tomas points to several economic indicators that suggest a more optimistic outlook than many headlines portray. Specifically:
- US Growth Nowcasts: These indicators, which track real-time economic growth, fell in February but have since stabilized.
- Citi Economic Surprise Index (CESI): This index measures whether economic data is meeting or exceeding expectations. After a downturn in January, it’s also shown signs of leveling off. A rising CESI means data is better than expected; a falling CESI means it’s worse.
The stabilization of these indicators suggests that the market’s earlier defensive posture might be easing.
Bitcoin’s Past Performance: Summer 2024 and Late 2018
Tomas draws parallels between the current situation and two previous market downturns: Summer 2024 and late 2018. Both periods saw significant market drops fueled by “growth/recession scares” and other external factors.
- Summer 2024: Concerns about economic growth and a yen carry trade unwind caused a 10% drop in equities and a roughly 30% drop in Bitcoin.
- Late 2018: Escalating trade wars led to a 10% initial drop in equities, eventually deepening to a 15% decline. Bitcoin fell by about 54%.
The current ~10% drop in equities and ~20% drop in Bitcoin echoes these past events. The key question is whether the current situation will mirror the relatively contained Summer 2024 correction or the more severe late 2018 downturn.
A More Optimistic Outlook
Tomas believes the current situation is more similar to Summer 2024. Several factors support this view:
- Easing Financial Conditions: After tightening earlier in the year, financial conditions have recently loosened.
- Weakening US Dollar: The dollar’s recent weakening contrasts with its 2018 surge, which amplified selling pressure.
- Positive Leading Indicators: Most leading indicators still suggest continued economic expansion.
- Favorable Seasonality: US equity indices often rebound after a weak February.
- Tight Credit Spreads: These indicate stable credit markets, not a looming economic crisis.
Tomas acknowledges the ongoing discussion around potential tariffs, but he’s less concerned than many, believing that April 2nd (“tariff liberation day”) will be a key date for clarity. He suspects the market’s recent resilience suggests a positive outcome.
The Bottom Line
While uncertainty remains, Tomas leans towards a more positive outlook, anticipating a recovery similar to that seen after Summer 2024 rather than the prolonged downturn of late 2018. At the time of writing, Bitcoin was trading at $86,557.
