# An inverted yield curve may be signaling a recession is on its way, but that may be good for bitcoin prices.

Typically, an inverted yield curve has signaled that a recession was on the way.

In fact, an inverted yield curve has predicted recession in the last 7 out of 7 times.

For those keeping score at home, that is 100% accuracy over the last 40 years!

Cool!

# So, what's an inverted yield curve and why does that matter for bitcoin?

Typically, bonds yield higher interest rates the longer dated they are.

For example, a 3 month bond pays a lot less interest than say a 10 year bond.

An inverted yield curve happens when shorter dated bonds have higher yields than longer term ones.

Specially, the ones that are batting 100% for recessions are the 2 and 10 year bonds.

Just recently the yield on the 2 year treasury was higher than the 10 year treasury.

Something we haven't seen since... 

The Great Recession.

https://i.postimg.cc/WzYWJDCY/yieldspread-2x.png

(Source: https://yieldcurveindicator.com/#what)

When the spread (the difference between the 2 and 10 year treasuries) goes below "0", a recession is likely imminent.

# Why does this matter?

Historically, these yield curve inversions have happened anywhere from 1 to 3 years before the economy officially enters a recession.

Well, the latest inversion happened at the end of March.

If history is any indicator, it means the clock is officially ticking as to when the next recession will be upon us.

This is interesting for bitcoin because it has never existed during a recession.

It was created shortly after the last one happened.

Will money flock to bitcoin as a safe haven or will bitcoin be seen as one of the riskiest assets of all on the risky asset spectrum?

Currently I would argue that bitcoin has behaved most similar to an extremely risky asset, mostly catching a bid in boom times and being sold off harder than most during times of uncertainty.

# However, that was not always the case...

Bitcoin was once seen as a safe haven asset.

There was a period of years where bitcoin was mostly correlated with gold as opposed to risky assets.

It was seen as something that investors would flock to during times of uncertainty and global turmoil.

What is going to happen this time?

We will likely find out within the next year or so...

Stay informed my friends.

-Doc