I was thinking about this - it probably won’t be. It’s just a lot of people will end up feeling sheepish.
Recessions tend to bring down economies when they impact on wider economic activity - eg in the Great Depression it was all the loans taken and functional capital misused to play on the stock market. In the Great Recession it was mortgages in arrears, and the huge credit crunch as banks tried to balance their books.
At least at the moment, Bitcoin is probably mostly made up of small investors using small savings (sub 20k USD) that aren’t leveraged up in any way. If Bitcoin collapses, people just lose their shirts, but not their homes and jobs.
It's possible. This bubble reminds me of the South Sea Company bubble. Whatever utility Bitcoin has is being massively dwarfed by the price speculation.
By now I think it's essentially zero-sum gambling what's going on. No dollars are going to be destroyed when the bubble bursts (if it is a bubble). They just change owner. No factories will close. Probably no major banks are going to crash. Just individuals losing or earning money.
All of this of course might change if/when factories/banks begin to invest heavily in bitcoin.
Right now it'd probably be a net positive to the economy. Many of the people who were in early and have made paper millions weren't all that rich before and just happened to get lucky, while the money that's cashing them out now is largely coming from wealthy people & institutions that don't want to be left behind. Redistribution from rich -> poor is usually an economic plus, because it shifts cash from people who have a tendency to sit on marginal dollars to people who have a tendency to spend it.
This could reverse if the average man on the street starts investing significant amounts of money, enough that they'd miss it if it evaporated. Then we'd get a big recession when the bubble popped.
There are large investments in mining hardware (and ongoing electricity costs) that wouldn't be useful without the bubble and would get wasted if the bubble collapses.
Recessions tend to bring down economies when they impact on wider economic activity - eg in the Great Depression it was all the loans taken and functional capital misused to play on the stock market. In the Great Recession it was mortgages in arrears, and the huge credit crunch as banks tried to balance their books.
At least at the moment, Bitcoin is probably mostly made up of small investors using small savings (sub 20k USD) that aren’t leveraged up in any way. If Bitcoin collapses, people just lose their shirts, but not their homes and jobs.