Bitcoin was birthed out of a financial crisis—now that it’s a teenager, it’s time it comes face-to-face with its first major recession.

Sovereign debt has declined significantly in value this year, which means precipitously higher borrowing costs for already fragile economies. Insolvencies are potentially on the horizon, and credit risk can become systemic: when one country defaults, another three will default because they were lending to the first.

Speaking of corporates, US corporate credit spreads—the premium paid by corporate borrowers relative to Treasury yields—are widening as buyers of credit shy away, another tightening financial condition.

There’s a very strong possibility that recession is on the horizon or has already begun. The business cycle is the primary driver of investment returns, so understanding where we are in the cycle is crucial.

In tomorrow’s “Bitcoin's first major recession: Part Two,” we’ll explore the effects of a contractionary economic climate on bitcoin. How will bitcoin trade during the recession, and more importantly, how will it emerge in the eyes of the world: a speculative risk-on asset or the idealized risk-off savings technology?