US recession, circular crypto economy

While most analysts expect the crypto bull cycle to continue until the end of 2025, concerns over an economic recession in the United States, along with crypto’s “circular” economy, may still threaten crypto valuations.

Despite the recent market correction, most crypto analysts expect the bull cycle to peak after the third quarter of 2025, with Bitcoin (BTC) price predictions ranging from $160,000 to above $180,000.

Beyond external concerns, such as a potential recession in the world’s largest economy, crypto’s biggest industry-specific risk is the “circular” nature of its economy, according to Arthur Breitman, the co-founder of Tezos.

“Within the industry, the main risk is that the industry is still very much in search of grounding. It’s all still very circular,” Breitman told Cointelegraph.

“If you look at DeFi, for example, the point of finance is to finance something […], but if the only thing that DeFi finances is more DeFi, then that’s circular,” said Breitman, adding:

“If the only reason people want to buy your token is because they feel other people will want to buy this token, that’s circular.”

This is in stark contrast to the stock market, which is “built on revenue-generating businesses,” making the crypto industry’s “lack of grounding” one of the main industry threats, Breitman added.

Other industry insiders have also criticized the state of the crypto economy, specifically related to the latest memecoin meltdowns, which are siphoning liquidity from more established cryptocurrencies.

*Solana outflows. Source: deBridge, Binance Research*

Solana was hit by over $485 million worth of outflows in February after the recent wave of memecoin rug pulls triggered an investor flight to “safety,” with some of the capital flowing into memecoins on the BNB Chain, such as the Broccoli memecoin, inspired by the Changpeng Zhao’s dog.

US recession fears are crypto’s biggest external risk: Tezos co-founder

Beyond industry-specific events, larger macroeconomic concerns, including a potential US recession, threaten traditional and cryptocurrency markets.

“In terms of macro events, I still think we could see a recession,” said Breitman, adding:

“There’s a lot of bullish winds for the market, but there’s also a lot of traditional recession indicators which have been flashing for a while now. So I don’t think you can rule it out.”

Cryptocurrency markets still trade in significant correlation with tech stocks, meaning that a recession will cause a widespread sell-off, he added.

The current trade war concerns, driven by US President Donald Trump’s import tariffs and continued retaliatory measures, have reignited concerns over a potential recession.

Over 40% of market participants expect a recession in the US this year, up from just 22% a month ago on Feb. 17, according to the largest decentralized predictions market, Polymarket.