According to analyst Sean Foo, the U.S. government is at risk of a debt spiral, which could eventually trigger a recession. Stocks could crash under such conditions, and Bitcoin and Ethereum correlations mean cryptocurrencies could be in trouble too.
On the other hand, many still believe that both Bitcoin and Ethereum are still good hedges for when economic collapse finally happens. This outcome is possible under low correlation conditions. Lower demand for the dollar would also likely be among the biggest factors fueling demand for Bitcoin and Ethereum.Mr. Sean Foo noted that the recent U.S. credit downgrade has unexpectedly triggered more
for the dollar. He explained that the dollar’s global reserve currency status meant that there was heavy demand for the currency from across the globe. In other words, there might not be much of an impact in the short-term.The analyst believes that U.S. credit repayments could go higher and this would raise the risk of a default on bond yields. It might force the U.S. to print more money, thus devaluing the dollar.
If this happens, demand for assets such as gold, Bitcoin and Ethereum will likely be higher. However, that outcome is not expected to take place within the next 12 months.
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