A new survey shows economists increasingly believe the Federal Reserve can tame inflation without triggering a recession. This shifting sentiment could provide a bullish catalyst for cryptocurrencies.
Soft Landing Odds Appear Better Recently
According to the National Association for Business Economics (NABE), nearly 70% of economists are at least somewhat hopeful the Fed can bring down inflation to its 2% target without spurring a recession.
That reflects growing confidence in a "soft landing" scenario after surveys earlier in 2022 painted a gloomier picture. Back in March, a similar NABE poll found 60% of economists skeptical about avoiding a downturn.
The results align with recent data showing inflation cooling and the job market still resilient, though some sectors face challenges. With appropriate policy adjustments, the Fed may thread the needle.
Potential Boost for Risk Appetite
If the Fed successfully engineers a soft landing, it would likely ignite a risk-on rally across assets like stocks and cryptocurrencies.
Aggressive Fed tightening has crushed risky markets in 2022, as investors brace for recession impact. But clear evidence that the economy is stabilizing without contracting could ease those concerns.
The Fed is also seen as nearing the end of its hiking cycle, with the pace of increases likely to slow. Avoiding a hard landing may limit how high rates ultimately need to go.
This rosier backdrop would boost investor appetite and provide tailwinds for crypto prices after a grueling bear market. Bitcoin and Ethereum would be prime beneficiaries in a soft landing scenario.
But Challenges Remain for Sustained Crypto Rebound
However, economists aren't out of the woods predicting recession avoidance yet. There are still several variables that could upend the soft landing narrative:
- Aggressive Fed tightening may still tip economy into contraction
- Major central banks hiking in unison creates uncertainty
- Geopolitical tensions around Ukraine war and China/Taiwan
- Supply chain troubles and high energy/food costs stickier than hoped
So while soft landing prospects may be improving, crypto is unlikely to surge back quickly to former highs. Expect continued volatility as the economic path unfolds.
What Would a Confirmed Soft Landing Mean for Crypto?
If clear signs emerge the Fed has succeeded in taming inflation without sparking recession, cryptocurrencies could see:
- Improved risk appetite providing tailwinds for prices
- Potential heavy rotation back into high-growth assets like tech stocks
- Mainstream crypto adoption accelerating as economic confidence grows
- However, lingering macro uncertainty may prevent euphoric crypto bull run
The confirmation of a soft landing would mark a major milestone for crypto establishing itself as an asset class through times good and bad.
How Should Crypto Leaders Prepare Now?
To capitalize if the economic backdrop improves, crypto companies should:
- Keep supplementing reserves to endure any lingering volatility
- Continue focusing on real-world utility, not speculation
- Build on community engagement efforts during the bear market
- Avoid complacency and remain diligent on security despite optimism
Hope for the best but prepare for the worst. If crypto builders stay dedicated to their visions through adversity, the future remains bright.