The Sahm Rule, a key recession indicator, continues to signal a high risk of an economic slowdown in the United States, adding to the bearish sentiment in cryptocurrency markets already struggling with negative on-chain trends.
According to a recent analysis by ETC Group (now part of Bitwise), the Sahm Rule remains in effect, implying an imminent recession in the United States. Created by former Federal Reserve economist Claudia Sahm, this indicator signals the onset of a recession when the three-month average unemployment rate increases by 0.50 percentage points or more from its lowest level in the previous 12 months.
The latest data reveals the Sahm The recession indicator stood at 0.53 in July 2024, up slightly from the previous month. This sustained rise above the required threshold suggests that Recessionary pressures persist despite the resilience demonstrated so far by the US economy.
The current recession risk comes as cryptocurrency markets face their challenges. ETC Group’s analysis indicates that key Bitcoin on-chain metrics have continued to trend negatively. Net sales volumes on Bitcoin spot exchanges totaled approximately -$606 million over the past week, although the pace of sales has gradually declined throughout early September.
Additionally, Bitcoin whales transferred 9,477 BTC to exchanges on a net basis last week, contributing to increased selling pressure. As a result, Bitcoin exchange balances have increased over the past week.
The bearish on-chain data aligns with broader negative sentiment across crypto markets. ETC Group’s internal “Crypto Asset Sentiment Index” continues to signal bearish sentiment, with only 4 out of 15 indicators above their short-term trend.
Some analysts, however, see a potential shift in market conditions. ETC Group suggests that the combination of macro and crypto sentiment capitulation in early August may have marked a significant tactical bottom for Bitcoin, potentially signaling the start of a new bull run. This view is based in part on expectations of looser monetary policy from the Federal Reserve, which could provide a favorable tailwind for cryptocurrencies in the months ahead.
As the market navigates these conflicting signals, recession risks and on-chain bearish trends persist, and the potential for monetary policy changes and oversold conditions could set the stage for a market reversal.
