The Impact of a U.S. Recession on the Crypto Market

Historically, U.S. recessions have upended global markets. With cryptocurrency now a key asset class in 2025‘s digitally connected and increasingly decentralized world, many investors want to know how a U.S. recession could impact the crypto market. Is Bitcoin a hedge, or will it sink too? Do altcoins have resilience amid wider financial pressures? Read on to find out.

In This Guide:

• What is a recession?
• How does the U.S. contribute to and impact crypto?
• How a U.S. recession could impact crypto markets
• Is there any way a U.S. recession could pump crypto?
• The answer is macro
• Frequently asked questions

What is a recession?

In the United States, a recession is traditionally considered to be at least two consecutive quarters of negative gross domestic profit (GDP) growth. This definition has typically been adopted by financial analysts, journalists, and policymakers, in part because it is easy to understand.

However, the term is often misunderstood and politicized.

In 2022, the Biden administration and some economists emphasized the NBER’s broader definition. Though it was controversial, the definition more accurately reflects the reality of a recession in a changing world.

This means that even if GDP contracts for two consecutive quarters, it does not automatically indicate a recession unless other economic indicators confirm a broader and sustained downturn.

The broader definition of a recession is important because the world is changing. Depending on the reason for the market downturn, a recession today may not look the way it did in the past — so may not affect crypto markets in the way we might expect.

Indicators used to determine a recession

There are several key indicators used to assess whether the U.S. is in a recession. These include:

• Real GDP: Takes nominal GDP and adjusts it for inflation, essentially measuring the value of goods and services produced using the prices of a base year.
• CPI: Measures inflation by tracking changes in the prices of a basket of goods and services that a typical consumer purchases.
• PPI: Measures changes in the average selling prices received by domestic producers for their output.
• Retail sales: Refers to the sale of goods and services directly to end consumers for personal or household use, either in-store or online.
• Job creation: The process of increasing the number of paid positions available in an economy or organization.
• Unemployment rate: The percentage of people in the labor force who are unemployed.
• Yield curve inversion: This occurs when short-term debt instruments (like Treasury bills) have higher yields than long-term debt instruments (like 10-year Treasury bonds).
• M2 money supply: A broad measure of the money supply that includes M1 (currency and checking accounts) plus savings accounts, money market accounts, and small-denomination time deposits.
• Housing market: The buying, selling, and renting of residential properties.
• Credit spreads: Represent the extra return investors demand for taking on more credit risk.
• Delinquency and default rates: Delinquency refers to a borrower being past due on a payment, while default means a loan has gone into an extended state of non-payment.
• Stock market performance: Many Americans have significant exposure to the stock market. When stock prices rise, individuals feel wealthier.

How does the U.S. contribute to and impact crypto?

The United States plays a key role in the global crypto market. The region makes up a large share of cryptocurrency activity across multiple areas, including trading volume, startups, mining, developers, and venture capital/investment. According to Chainalysis:

1. North America, primarily driven by the United States, accounts for 24.4% of global cryptocurrency transaction activity, with an estimated $1.2 trillion in value received on-chain between July 2022 and June 2023.
2. The United States ranked first overall worldwide in cryptocurrency transaction volume, while Canada placed seventh globally.
3. North America’s cryptocurrency market is heavily influenced by institutional activity, with 76.9% of transaction volume coming from transfers of $1 million or more.

The U.S. accounts for a significant portion of the crypto market’s mindshare.

How a U.S. recession could impact crypto markets

Given the U.S.’s substantial role in the crypto market and how recessions are determined, we can now examine how an economic downturn might impact crypto markets.

The crypto market is significantly influenced by U.S. economic activity. While this implies some inherent diversification with limited downside potential, it still leaves the crypto market vulnerable to changes in U.S. economic conditions. In the long term, however, monetary policy intended to ease the impact of a recession may benefit the crypto market (more on this a little later).

1. Historical evidence of U.S. recession’s global impact

The U.S. economy plays a central role in global finance, trade, and investment. Many countries have a significant amount of exposure to U.S. assets. Some recent examples include the 2008 Global Financial Crisis and the Federal Reserve rate hikes (2022-2024).

The GFC originated in the U.S. housing and financial sectors and spread globally due to interconnected banking systems.

2. Trade and reserve currency exposure

About 60% of global currency reserves are held in U.S. Dollars. The U.S. is a consumer economy, and a slowdown in demand directly impacts manufacturing/export-driven economies.

3. Signs of a recessionary environment

It’s crucial to understand that governments rarely announce recessions. However, indicators suggest the U.S. may already be experiencing a recession, despite no official declaration from institutions.

U.S. recession effects on crypto are indirect

To summarize, the U.S. makes up a significant portion of the crypto market but not the majority. Many nations depend on trade, USD, and access to U.S. markets and liquidity. Economic constraints may explain investors’ hesitancy and crypto price fluctuations.

Is there any way a U.S. recession could pump crypto?

While a U.S. recession could negatively affect risk assets, the U.S. government’s responses might boost crypto prices. Both Bitcoin and altcoins could benefit from an influx of capital seeking higher returns or as a hedge against inflation.

The answer is macro

The potential for a U.S. recession to trigger global downturns is well-documented. Macro evidence suggests that a U.S. recession could negatively affect global markets, impacting crypto activity, but this doesn’t imply long-term doom.

Recession-related downturns can lead to strong rallies, supported by central bank responses.