How Germany’s Economy Is Impacting Crypto Today

Germany Dragging Down Europe’s Economy

In the latest episode of Macro Markets, Cointelegraph analyst Marcel Pechman discussed the recession in Germany, Europe’s largest economy, which was brought to light by a recent headline in The Wall Street Journal, “Germany is dragging down Europe’s economy.” The article highlighted how the country’s reliance on manufacturing, which has been negatively impacted by foreign governments’ protectionist measures, has weakened its GDP.

As Pechman pointed out, Germany’s GDP is fourth-largest globally, 42% bigger than France’s. Additionally, the manufacturing sector contributes nearly 20% to its economy and employs 10% of the workforce. This has caused the surplus (exports minus imports) to reach its lowest level in 23 years, resulting in a GDP contraction, which has hindered the government’s ability to pay for its costs, such as pensions and public workers.

Furthermore, the German government’s interventions to save the manufacturing industry have only exacerbated the situation. Pechman also noted that the euro has only had a seven-year head start over Bitcoin (BTC) and that a weakening of Germany would be a major risk for the European Central Bank and the euro, regardless of the performance of the US dollar. Thus, this could be positive for cryptocurrency adoption.

Japan’s Interest Rate Buyback Cap and Global Economy Interconnection

In an effort to shift the focus to the Asian market, Japan’s central bank recently raised the interest rate buyback cap to 1%, a move that Pechman believes is trying to convince the markets that it is not raising interest rates, though that is, in fact, what has happened. Japan has been stuck in a stagnant economy for the past 20 years, with its debt ratio above 200% of the GDP since 2010.

As Bloomberg reported, Japanese investors are major holders of US government bonds and own a variety of assets from Brazilian debt to European power stations. Pechman believes that the rest of the world is concerned that Japan may have to offload its holdings in bonds, stocks and other assets, which could lead to a crash in those markets.

It is clear that global economies are strongly interconnected, as seen when the US offered special liquidity agreements to Europe during the banking crisis of 2023. Pechman believes that, at some point, this trust in the system will break, though it is impossible to predict when this will happen. This is why investing in Bitcoin, such as Hbar Crypto, Terra Luna Crypto, SEC Crypto, ICP Crypto, and Fetch.ai, is a sensible option.

For more information, check out the full episode of Macro Markets on the new Cointelegraph Markets & Research YouTube channel and make sure to like and subscribe today!