International Monetary Fund (IMF) forecasts a slowdown in global economic growth, as investors are warning of further volatility in the digital asset markets.
It has been reported that the IMF’s July update on the World Economic Outlook titled “Gloomy and More Uncertain” points to “higher-than-expected inflation,” and a contraction of global output as indicators of incoming poor economic growth.
The report stated:
“The risks to the outlook are overwhelmingly tilted to the downside.”
However, macro factors have been linked to the crypto bear market, prompting crypto analyst Miles Deutscher to warn his 154,000 Twitter followers to expect volatility in the markets. He noted the incoming earnings reports from Microsoft, Google, Apple, and Meta, along with the gross domestic product (GDP) numbers from the United States, could create further turbulence.
Crypto investors are also bracing for a rise in interest rates in the United States this week. Bloomberg reported on Tuesday that the Fed is expected to raise rates by as much as 75 basis points, or 0.75%, up to 2.25% in an attempt to tighten its monetary policy and stump inflation.
There are also industry observers who expect the US to be officially in recession when the Q2 GDP figures for the country are published on July 28. Investopedia defines a recession as two consecutive quarters of negative GDP growth.
Crypto market YouTuber DustyBC said that the global slowdown coupled with potentially reduced US GDP numbers could explain why Bitcoin (BTC) price dipped below $21,000.
Meanwhile, founder of Cosmos-based cross-chain decentralized finance (DeFi) hub Umee Brent Xu asked on Monday in a tweet, “Does a macro recession = a crypto recession?” It added that there may be several days of volatility, echoing Deutscher’s observations. Elizabeth Gail said that Bitcoin markets were likely to recover when the uncertainty about the current state of the economy and geopolitical tensions are resolved. However, there is no telling how long that will take.
While the economic outlook looks gloomy, the IMF pointed out that the sell-offs in crypto since May due to liquidations, bankruptcies, and losses at major firms like Celsius, Three Arrows Capital, and Voyager Digital Holdings have had little impact on other financial systems.
Thus, the report stated:
“Crypto assets have experienced a dramatic sell-off that has led to large losses in crypto investment vehicles and caused the failure of algorithmic stablecoins and crypto hedge funds, but spillovers to the broader financial system have been limited so far.”