It may be too early for Bitcoiners to start getting bullish over the longer-term impacts of a potential recession on Bitcoin’s price, says 10x Research head of research Markus Thielen.

Thielen said in an April 11 markets report that credit spreads continue to widen, indicating that “recessionary concerns may be seeping deeper into the economy.”

“Expecting a bullish impulse is too early,” he said.

Bitcoin may face short-term headwinds

While the long-term effects of a recession could be bullish for Bitcoin (BTC) — due to the monetary easing that typically follows US Federal Reserve rate cuts — Thielen warned that Bitcoin may face headwinds before gaining bullish momentum.

“Normally, Bitcoin first sells off when China devalues or the Fed cuts, as the first cut might not be so impactful and also confirms economic weakness,” Thielen told Cointelegraph. 

Bitcoin is trading at $80,620 at the time of publication. Source: CoinMarketCap

White House crypto and AI czar David Sacks said in an April 10 X post that it is “time for a rate cut” after the core Consumer Price Index increased 2.8% year-by-year for March, the lowest it has been since March 2021.

CME Group’s FedWatch Tool shows a 64.8% chance of no rate cut at the Federal Reserve’s May Federal Open Market Committee meeting.

Traders typically see interest rate cuts and monetary supply expansions as positively affecting asset prices, especially Bitcoin and other cryptocurrencies.

However, Thielen said that historically, when year-over-year credit spreads “begin to widen,” Bitcoin often faces more downside pressure and takes longer to recover.

Related: Bitcoin ‘significantly de-risked here’ as nearly 80% of cyclical price correction is done — Analyst

“This pattern suggests that while a longer-term opportunity may emerge, Bitcoin could still face pressure in the near term,” Thielen said. He added that currency devaluations have also historically been bearish for markets in the short term before being bullish in the long term.

It comes amid growing concern among market participants over the weakening US dollar.

The US Dollar Index (DXY) is sitting at 100.337, down 2.92% over the past five days, according to TradingView data. 

The DXY is sitting at 100.337 at the time of publication. Source: TradingView

Trading resource account, The Kobeissi Letter, said in an April 10 X post, “The US dollar has exited the room. Once again, something is broken.”

Meanwhile, BlackRock’s head of digital assets, Robbie Mitchnick, said in late March that Bitcoin would most likely thrive in a recessionary macro environment. 

“I don’t know if we’ll have a recession or not, but a recession would be a big catalyst for Bitcoin,” Mitchnick said.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.