World Bank: The worst predictions of the economic crisis in the world have now come true

In its latest report on the world economic outlook, the World Bank, referring to the current crisis, has predicted that some developments can bring the world economy into a deep recession. However, the data shows that Bitcoin investors can hope to ride out this recession more than other investors.

World Bank: The worst economic predictions have now come true

To the report Economists at BINCrypto, a Washington-based organization, forecast global GDP growth to reach 1.7% in 2023, roughly one percentage point lower than the 2.9% forecast for 2022.

In addition, Ayhan Kose, the economist in charge of the report, said that we are now at the point that the bank had predicted as the worst-case scenario six months ago, and further increases in interest rates would cause an economic collapse. This economist said:

It put the world economy in a critical situation, and if financial conditions worsen, it can easily enter recession.

The bank added in its report that a one percent increase in global interest rates would reduce its baseline GDP growth forecast from 1.7 percent to 0.6 percent.

The US Federal Reserve is likely to raise interest rates less sharply this year than in 2022, where we saw four periods of 0.75 percentage point rate hikes. Decline in unemployment and wage growth in December 2022 is a sign that the US economy is responding to the Federal Reserve’s tightening policies, which investors hope will ease in 2023.

The US consumer price index for December 2022, which the Federal Reserve uses as an inflation indicator, will be released on January 12. A lower number means that the Fed’s tightening policies are working, thereby reducing the likelihood of sharp interest rate hikes in 2023.

Kuze noted:

Although the economies may not technically be in recession, the Eurozone and the United States are likely to experience a relative recession.

Several factors, including Russia’s military attack on Ukraine, high interest rates, high inflation and less investment, have contributed to the bank’s pessimistic forecasts.

After the severe shrinking of the economies of developing countries during the Corona epidemic, the World Bank expects the amount of investment in these regions to remain at the level of 3.5%. This bank expects that the amount of investment will not grow until 2024.

The managing director of the International Monetary Fund predicted earlier this month that one-third of the world will experience recession by 2023.

Conditions for Bitcoin investors will be good

Cryptocurrency investors hope that Bitcoin will fulfill its potential as an anti-inflation asset and that it will defy central bank efforts to tighten monetary policy.

Every 210,000 blocks, or about four years, the Bitcoin algorithm halves the amount of Bitcoin issued for successfully mining each transaction block. This software mechanism controls the scarcity of Bitcoin as an asset. More demand will increase the price of Bitcoin and thus increase the motivation of miners to maintain the security of the network.

The algorithm currently rewards miners with 6.25 bitcoins per successfully mined block. This reward will be reduced to 3.125 bitcoins at the next halving event in April 2024 (April 1403).

In simpler terms, Bitcoin’s monetary policy is pre-set by software rather than a central authority.

While Bitcoin has maintained its correlation with bearish stock markets for most of 2022, it has not lost value over long periods like the US dollar.

Bloomberg data from 2011 to 2021 (2018 to 2019) shows that while key CPI rates (including food and energy costs) increased by 28%, Bitcoin’s value relative to the CPI decreased. In other words, the price of everything that was one bitcoin in 2011 is 0.004 satoshis in 2021.

As a result, over a 5-10 year time horizon after a recession, Bitcoin investors are likely to have the safest investment.