Bloomberg warns of a financial crisis: will it boost Bitcoin, altcoins?

Bloomberg’s editorial board has warned of a potential financial crisis similar to what happened in 2008/9 happening this year as geopolitical risks rise. 

In an article, the board warned that such a crisis could be triggered by the substantial sums of money held in the debt market. As business and consumer confidence fall and recession risks grow, they argued that lenders may begin demanding more cash collateral.

The board also warned that the US was highly leveraged, with the public debt soaring to over $36.8 trillion. Total corporate debt has jumped to a record high of over $13.7 trillion, while households hold over $18 trillion.

Bloomberg warns that banks and other lenders lack the resources to absorb these potential losses. The concern is that the next financial crisis could be worse than those that occurred during the pandemic and the 2008 financial meltdown.

This warning comes as the U.S. has alienated itself from allies by imposing tariffs. It has even raised tariffs on goods from China to 145%, increasing the risk of a recession. Polymarket traders currently put the odds of a recession this year at 65%.

A major financial crisis may benefit Bitcoin and altcoins

A recession or a financial crisis would hurt Bitcoin (BTC), altcoins, and the stock market initially as the fear rises. It would also lead to a higher unemployment rate in the economy.

However, history shows these risk assets often perform well after major crises due to Federal Reserve and government interventions. The Fed slashed interest rates to zero during both the global financial crisis and the COVID-19 pandemic. It then implemented quantitative easing, printed money, and injected liquidity into the economy.

In parallel, the federal government provided a $700 billion bailout to banks during the GFC and issued trillions in stimulus checks during the pandemic. These actions helped trigger a strong rally in both stocks and cryptocurrencies.

U.S. indices like the S&P 500 and Nasdaq 100 entered bull markets after the GFC. Similarly, Bitcoin, altcoins, and equities soared following the COVID-era interventions, before retreating when the Fed began hiking rates in 2022.