Recession

Recession is a significant and widespread decline in economic activity lasting several months. The common technical definition is two or more consecutive quarters of negative GDP growth.

How recessions affect crypto

Short-term — negative:

• Risk-off sentiment pushes investors toward cash and bonds, away from speculative assets
• Bitcoin and altcoins typically drop sharply alongside equities — sometimes harder
• Forced liquidations as leveraged positions get closed

Longer-term — potentially positive:

• Central banks respond with rate cuts and monetary stimulus
• Expanded money supply weakens fiat currencies, historically benefiting hard-capped assets
• Investors seeking inflation hedges may allocate to Bitcoin

Bitcoin as a recession hedge

The "digital gold" thesis holds that Bitcoin should act as a safe haven in recessions. In practice, the evidence is mixed — Bitcoin has behaved more like a high-risk asset in short-term selloffs, but has historically recovered and reached new highs after each recessionary period.

Impact on mining

During recessions, electricity costs and hardware prices may fall, improving mining margins. However, if the crypto price drops faster than costs, marginal miners go offline, reducing network hashrate. This triggers a difficulty adjustment that rebalances profitability for the remaining miners.

See also

• Difficulty
• Halving
• Inflation
• Profitability