How Likely is a Recession in 2024? | Quantitative Expert on Bitcoin, Crypto, Market Crash

And doing that is normally what pushes Us into a recession today I interview Quant analyst Benjamin Cowan and I ask Him the tough questions if a recession Happens how deep what does that mean for The S&P and what does that mean for Bitcoin and while we start by discussing Macro meaning inflation interest rates The yield curve all that tailors into Crypto and how that all affects Bitcoin At what price of Bitcoin do you become a Buyer that is my main concern right now Is that if Bitcoin like the video send This to a friend and let's start what Are your general thoughts on the market Right now and let's just jump right in Man are we headed into a financial Crisis be real look I mean recessions Are something that everyone talks about And you know have been talking about for A long time and I think there's good Reason for that there there are a lot of Macro indicators that suggest some Weakening in in certain areas but There's also some other areas that have Remained quite resilient um and one of The things that everyone has sort of Cited for a long time is is of course The treasury yield curve and the reason We look at this is because it's kind of Like in crypto right if you were to lock Up something for a month versus locking It up for a year you would expect to get A higher yield if you locked it up for a

Year right because you're you're you're Sort of taking on more risk you're Locking up your funds for longer but you Can see the treasury yield curve you're Actually getting a higher annualized Yield at the short end of the curve Rather than long end of the curve so This kind of tells us to some degree That the economy is is somewhat sick Right it tells us it's somewhat sick and The reason why this yield curve is is we Should pay attention to it is because You know if you scroll back through time And look at how the yield curve this is What it normally looks like right so This is what the yield curve would look Like in in normal Economic Times right When you know the short end of the curve You're getting a lower interest rate Than the long end of the curve back Before the financial crisis we had an Inverted yield curve right and looked Like this Back before the dot crash we had an Inverted yield curve and you can go back In time and look at all sorts of Prior Examples where we had an inverted yield Curve which ultimately led to to a Recession now the fascinating thing Right now is that we are getting a bare Steepener as opposed to a bull steepener So a bear steepener is when the Uninversity not but the Unversioned not because the short end of

The yog curve is going down which would Be indicative of the FED cutting rates But the we're seeing the Uninversity yield curve is going up so That's known as a bare steepener a bull Steepener again is when the short end Goes down and the reason it's called a Bull steepener when the short end goes Down is because the Imp the implication Is that the FED is cutting rates and If The Fed is cutting rates that's bullish For the economy because then the cost to Borrow money becomes cheaper right it Might not be bullish for the stock Market in the in the very very short Term but often times is sometimes Shortly after fed starts cutting rates The stock market will bottom and then And then sort of Go off into another Into another you know secular bull Market so we have to look at the yield Curve and and if you look at the spread On Treasury on on say the three Monon And the 10year right this is what it Looks like this goes all the way back to The 1960s okay so it's still loading um But here is so we have this going all The way back to the 1960s and you can See that anytime this goes below zero it Represents an inversion of the 3month And the 10 year yield and the last few Recessions have occurred after the [Music] Uninversity many other business cycles

And the truth is is like neither you or I have really experienced a full Business cycle because we were just Simply too young right we were not old Enough really to you know we were as i' As I've said right our biggest mistake Here in the dotom crash is that we were Only like 10 years old right like we Weren't able to go up and bu by all These tech stocks that were down so much If you go back to like the 1970s what You'll see is that we actually started Some of the recessions while the yield Curve was still inverted and I think one Of the reasons for that actually is Because during periods of high inflation The reaction function by the Federal Reserve is a lot different right so They're going to be a lot more hawkish Because their mandate is to bring you Know is to is for Price stability and so They might not be as quick to Pivot as They normally would be and in those Cases you can often get recessions Before the before the yield curve even Uninverted so that's sort of the the Initial thing and we we I can talk about A few other metrics as well but that's The initial thing that we're looking at Here because if you look at what's going On right now it seems like the Unversioned way which is Good well I mean it it means we're Likely getting closer to the end of the

Business cycle where we can sort of Start a new right where the FED we're Getting closer to the point where the FED starts to cut rates but we're still Arguably not there yet right that the Fed's not going to cut with with the Market the way it is I mean the S&P is Still above you know still above it's Like 4,300 I think at the time that We're recording this uh the fed's not Not that concerned and the labor market Where the unemployment rate just came in Today at 3.8% and non-farm payroll beat Expectations I think by almost double so The labor market at this point is still Resilient um so the FED really has no Incentive to cut rates you know over the Next couple of months not withstanding Some type of major market crash and Inflation still super sticky which Obviously markets High um unemployment Up um or employment up um all those Things contribute to it so yeah what are Some of these other charts yeah you're Right inflation is up this is headline Inflation and again their target is to Get to 2% but as they I mean Pal's Talked about that last percent is the Hardest percent to get right to go to From three to 4% down to 2% it's really Difficult to do that and doing that is Normally what pushes us into a recession The recessions are awful in the sense That people get laid off but one of the

Things that recessions also do is they Actually sort of bring inflation Back down to earth one of the reasons Why the labor market has been as Resilient as it has been is look at this Chart so this shows job openings okay Total non-farm job openings and you can See that there was a a pretty well- Defined Trend here coming out of the Financial crisis where we were just sort Of job openings were slowly going up and Then here's the pandemic drop right but Look at what happened after the pandem Or during the pandemic when all that Money printing occurred tons of job Openings right the cost to to borrow was So cheap the cost of cash was cheap and So a lot of people just wanted to hire And and and grow as quickly as they Could and so we you know we ended up Topping out over here at around 12 Million job openings which by the way You know before the pandemic we were Only at around 7even million job Openings so when you look at this chart What you'll see over the last like you Know couple years is that job openings Have been coming down but it hasn't yet Had a material impact on the labor Market because the starting point was Just so high right there was so much Excess to really get out of of the System and so you know those calling for A soft Landing which I mean again it is

A possibility right like we should Entertain all scenarios right the the People calling for a soft Landing I Suppose are are sort of hoping that we Maintain the Integrity of the prior Trend where you know this bounce is Ultimately sustained and we don't really See job openings go too much lower than Where they currently are the Counterpoint of course is that you know We've seen the this stochastic process Of just sort of moving down for a few Months and getting another one to two Months where we go back up to the upside But then it keeps going down and as long As fed the FED continues to hold rates Higher for longer then I think the Expectation would be that job openings Would would continue to sort of slowly Dwindle down and one interesting way to Sort of quantify this is is to look at So we we made a risk metric for for job Openings to sort of account for prior Movements in in the market and if you Look This is job openings risk metric right So you can see the gray shaded region And the blue line is the s&p500 but the Gray shaded region is where recessions Have historically occurred and then the Green line is the risk on job openings Right so you can see that it's been Going up recently the last print it Actually came down some because the job

Openings went back up but the reason why This is useful to look at is because After the the the job openings risk goes Up it's normally sometime after that That the Unemployment you know the unemployment Data starts to show weakness right so You can see over here in March of 2001 Job openings risk was going up and it Wasn't until you know three or four Months later maybe even four to five Months later uh yeah this was March till August so really yeah like five months Later it it took until the labor market Started to really show weakness and That's what ultimately brought the Recession same thing over here right job Openings risk went up first then the Labor market showed weakness in 2020 They they more like went up at the same Time but that was you know an event that Is very different from you know most Business cycles that we've seen and I Think that's the thing we have to look At right the the unemployment risk is Still relatively low but we know that When it starts to move it it can move Relatively quickly so your message today Is that we're not in a recession some People in the comment section speculate That we are but based on the metrics a Recession could come as early as When yeah so I've been of the opinion And I I think I've said this for you

Know for for basically the entire year And even in 2022 there was a lot of People saying that because there's the The the two consecutive quarters of Negative GDP right we did have that in 2022 and a lot of people use that Definition and if you use that Definition then you could say that we Had a recession in early 2022 I think The hard part for calling that a Recession is that recessions normally Occur when the labor market is showing Weakness not when you know not when We're at 50-year lows in the Unemployment rate and if you were to Look at at something like um initial Claims like look at initial claims we're We're still looking at a relatively low Level here on initial claims do note Though that last year initial claims Bottomed out in September and maybe We're seeing the same thing here again In in September initial claims bottoming Out meaning they could start going back Up but I I think the earliest we could And I've said this for a long time I Think the earliest is sort of the end of The year um it could happen early next Year as well I think is is where the Risk could come in and I think one of The reasons that could happen is if the Long into of the yield curve continues To go up right so we were talking about That earlier if the long end of the

Yield curve continues to go up then it It it makes the cost of capital you know It's it's more expensive to you know to To to borrow that could lead to people Reducing expenses which could then in Turn lead to an economic slowdown and Therefore rather than the continuation Of the bare steepener it could turn into A bull steepener where the FED has to Cut rates because we're we're leading Into a recession so you know if you Think about it 2020 we had a recession In q1 right again pandemic you know Black Swan type event but 2016 late 2015 2016 we did not have a recession in the United States but we we came close to One right so you know you're in crypto Right we know there's a lot of Seasonality related to markets and and Cyclical Behavior so I do think there is There is certainly a risk of of of a Recession in 2024 and it could again it Could it could occur uh later this year As well it it all sorts it depends on All sorts of things right I mean you Know if you if you look at at some of The prior Market Behavior like look at 1987 you know look at what happened in 1987 you this this drop by right here by The S&P 500 that was that occurred in October right this this drop here this Was October of a pre-election year of And and also the FED pivoted in 1987 as Well so you it's certainly possible that

The FED pivots this year but it would Take it would take something like that You know it would take like a 20 30% Drop in the S&P I think for something Like that to happen so my guess is the Most likely outcome is is the market Continues to adjust to higher rates Higher and higher rates Equity markets Slowly price that in and eventually it Likely ushers in a recession no Guarantees about that there have been Soft Landings in the past just as one Counter example just to provide you know One um if you look at again if you look At the yield curve I I would be remiss If I didn't at least mentioned this um There there was a period over here you Can look at 1966 we had an inverted Yield curve right here a very brief Inversion and we didn't get a recession Right now we got a recession a couple Years later which put it which led the S&P to new lows and then another Recession a few years after that which Then again led the S&P again to new lows Once again but we did not get one Immediately although the the inversion Was not nearly as much as it is today so You know when I look at this I have to I Have to say there's a lag right there's A lag on this stuff and and just one of The last charts I want to show on this Is this chart this shows the S&P 500 return on investment too low after

Inversion of the three-month and the 10-year yield and it's kind of messy When you look at it like this but look At this business cycle and then look at Say 1973 right look at this business cycle Compared to the financial crisis right It's not it's not that different from What we have historically seen it and I Don't I don't necessarily think that It's going to play out as badly as as it Did over here but you can kind of see That there's there's a process to this Stuff right it doesn't just play out Overnight even though I know a lot of us Would want us want to see it play out Overnight look at this one this was 1979 To 1980 after yield curve inversion and We were climbing the wall of worry for a Long time and then the labor market Showed weakness and then that's when the S&P just collapsed and went down to put In a new low so you know I think all That's important and of course if if the S&P were to drop significantly that of Course could have adverse effects on on The crypto Market by the way if you want access to These charts at home I'm going to put an Affiliate link down below 10% off with The ALCO and daily affiliate link and I Love how much like information Especially Ben when you come on and and Provide that perspective my question to

You is if a recession Happens how deep all right what does That mean for the S&P and what does that Mean for Bitcoin it's a great question right so So normally what it means for the S&P Right I can I can speak to what normally Happens um normally it means new lows Right and it doesn't have to be a Significantly lower low um again if you Go look at 1966 we didn't get a new low because we Didn't get a recession right so it it Kind of depends on if we get a recession Or not dur During the S&P puts in a new low that's What historically happens of course During a recession I want to show you This chart this is the ROI of the S&P During all these prior bare markets that We were mentioning this is the current The current cycle and of course this Assumes that the low is not in if the Low is in then the bare Market You could Argue that it already ended right back In in late 2022 we only continue to Follow this in case there is a lower low And then it sort of brings up the Question well is there precedent for it Taking this long before before another Lower low was achieved and there's a few Examples if you look at 1973 to 1974 it Was actually around this time when the S&P sort of put in its its final low

Which was a lower low and that was also During a period of high inflation but There's another one that might be a Little bit a better a better comparison And that's the one from 1946 to 1949 the Reason why that one's interesting is Because we just came out of World War II And this time we had the pandemic but They both caused a very similar thing to Occur and that's a lot of money printing Right you know you had to finance the War or you were trying to save the Economy from the pandemic so it led to a Lot of money Printing and we just went Through an inflationary cycle you can See over here that the S&P 500 just kind of had all these rallies Right and this was a really significant Rally over here too by the S&P off of These lows it didn't stop it from Putting in a new low 1111 days 1111 Right what are the chances right but 1111 1111 days after the whole thing Began it still put in a new low um all Those years later and if the S&P were to Do something like that today then you Know it could mean going just slightly Below the prior low right because the Prior low was right 3490 so it could Mean going to 3,300 or 3,400 or Something like that so I think we should Be open-minded to a to an outcome where You know it's a slightly lower low of Course it could it could turn into a a

Hard Landing where the S&P goes a lot Lower um But I I I think it's going to really Depend on on a lot of things and of Course I I don't know the answer to you Know to exactly how low it could go but I think we should be at least prepared For that outcome especially considering That historically recessions often lead To to a lower low in the S&P 500 let's just look at Bitcoin just in The like today what's bitcoin's next Move based on the Charts yeah so I mean right now Bitcoin Is at you know it's right around $28,000 um I I've sort of been of the Opinion for a while that we would get This rally and the reason for that is Because that's kind of what normally Happens when we get um a death cross Right so when you get a and I know the The death cross always sounds very Sensationalist and I I wish there was Another word for it maybe I could try to Popularize one but that's just what People call it right it's when the 50-day ese goes below the 200 day Estimate and oftentimes what happens is You sort of sell off just before it People see the headline death cross and Then the market pumps right out of the Death because they're lagging indicators Right when you get a death cross it just Means that the price has already gone

Down if if a shorter term moving average Is going to go below a longer term Moving average it just means the price Has already go gone down but what I'm Looking at here with the with with Bitcoin is what normally happens not Always but what normally happens is when You get a golden cross like back over Here in February you sell off into the Golden Cross but the overall trend up Remains the Same right so that's what we Saw right we had a golden cross Initially we got a selloff but the Overall trend remained to the upside This time we got a death cross I'm Arguing that we should be prepared for An outcome where in the short term we Rally into the death cross right we're Actually at the 200 day SMA right now Right around 28k but what if the overall Trend remains intact of a slight Downtrend that's exactly what we saw in 2019 in fact was a death cross a rally Into that death cross followed by a Lower low in November right and so that Is my main concern right now is that if Bitcoin takes out that prior June low of 24.8k let's say if it goes down to 22k Or 23k My worry is is you know where does That leave the altcoin market because There's very little liquidity right now In in the cryptoverse and and I I think The altcoin market you and I've said

This many times I know I've come on your Channel for the last year and a half and We we've been talking about how risky Altcoins are and um and yes like I I do Want to say to your audience like I I am Fully aware that some altcoins have done Well and that's always what happens Right there's always a few right there's Always a few that do well uh but most of Them have not right most of them have Bled significantly and you know just to You know can I can I take a minute to Just kind of give a few examples um Please wait wait wait before we get to Altcoins can I say ask one question sure Sure sure what price of Bitcoin do you Become a buyer I know you've been Nibbling this year but what do you have To see metrics wise or price levelwise For you to be a buyer so I I normally Look at the risk levels um so let me There's a couple of them that we can Look at actually that I think are are Relevant uh so one of them is let me see If I can find it it is this one right Here so what what I've been doing this Cycle is I I just DCA when this is below 04 risk uh currently the risk is 0484 so It's a little bit too high for me to be Interested right now uh but I did you Know I did pick some up late last year And early Maybe not maybe a little bit Early this year but that is mostly what I've gotten and I haven't bought any

Altcoins right so I've missed out on all The altcoin rallies but I've also feel Like i' I've preserved my Capital Because a lot of these altcoins have Just not really gone anywhere so this is One metric I look at and I'm I'm curious If it's going to play out like how 2019 Did right where we went to a low risk Level then we came back up here and then We sort of just slowly faded down this Was a recession by the way right when we Got another blue dot um you know when we Went back to these lower risk levels There's another one that we can look at This one is is the total risk and this Is built on the price risk the onchain Risk and the social risk and I think I've spoken you know to your audience Before and you about the social risk and In fact one of the reasons the social Risk has remained so resilient is Because of how many views your YouTube Channel gets you're very popular person Uh in the cryptoverse but this is what This metric looks like right the total Total risk and so you can kind of see That this risk metric is relatively low But if we see you know sort of a a Taking out those June lows and that Could take you down to these lower risk Bins and I think and I've said this a Long time right like DCA Bitcoin is Usually the best strategy like dcing Bitcoin over a long enough period of

Time especially when the risk levels are Low right I mean even at 28k as long as You have a long enough time frame in Mind you're probably going to be fine Right it's it's where the danger comes In is people who buy and then if they're Going to then sell it if there's a sharp Sell off down to say 20K or something And then they sell that after buying the Local top do they sell at local bottom That's where it becomes dangerous so it Depends on what your time frame is right One way to one interesting way to look At this is to color code this and what I Like to do is isolate everything but the Lowest risk band and you can kind of see What it looks like right now right like Every prehab year we hit the lowest risk Band at some point right this was 2011 Lowest risk band 2015 lowest risk band 2019 we were at The lowest risk band we haven't hit it Yet this cycle it doesn't mean that we Will and and by the way we could go to The lower risb even if Bitcoin is not at A lower low right it's just because the Idea is that there's you know there's Adoption in the cryptoverse and the Longer we go on The fair value goes up it's like looking At um it's like looking at this chart Right here the total market cap and Trend line right and and we I do the you Know we talked about the beauty of

Mathematics video series on my channel But it's basically the idea is that the The red line represents the fair value Of the asset class and we go through Periods of undervaluation and over Overvaluation and what's fascinating is That total market cap has gone sideways For what the last 16 months does the Market does it feel like it's gone Sideways for a lot of all coins they've Gone down the reason total market cap Has gone up is because Bitcoin or sorry The reason why total market cap has gone Sideways even though alts went down is Because Bitcoin went up so when you Isolate it like that and you overlay the Total summary risk that we were just Looking at onto this Chart right and then we just simply look At the lower Wristband this is what it looks like Right so you can clearly see the more Optimal time to buy just before a major Uptrend if you add another risb the 0.1 To 0.2 you can see that we've already Been in it right it doesn't mean that Another you know it doesn't mean that Bitcoin can't go to 23k it could and I I Think it probably will given enough time But that is what I would look for so I Would look for you know just lower risk Levels and and by the way I mean what I Normally do is I just set limit orders At the risk level so if if one of them

Gets filled um or at least that's what I Did late last year if if the price goes Down to a certain risk level then I'll I'll pick some up and and then I'll just Wait right and I think one thing that People should consider is that if you Really like something you should not Fear lower prices like if you're really Bullish on it right if you think that Bitcoin will eventually win out and go To much higher prices you should not Fear lower prices because it just gives You opportunity um it's like if you go To the store and you want to buy Something like you want to buy something In the store you're not put off if it's On sale right like that's that's it's More enticing to you not less enticing So hopefully people can see it that way But again I mean maybe this would be a Good SE a point to segue into into the Altcoin market because it if Bitcoin Does sort of see a selloff uh in November or or October sometime let's Say between now and the end of the year Then that could usher in um you know Some some lower prices on the altcoins Another interview drops very soon where Ben discusses altcoins click subscribe