It is practically a fact already. Inflation has spiraled out of control and the US Federal Reserve will have to withdraw liquidity from the system earlier than anticipated. Prices are going up everywhere. Failures in the production and distribution chains persist. Of course, inflation is not solely an American problem. We have inflation in China, in Europe and in many places. The phenomenon is global. Food, energy, raw materials, real estate, used cars, etc.
The Federal Reserve has promised to reduce bond purchases. What is known as “tapering”. On the other hand, they are already suggesting a rise in interest rates for July next year. In 6-7 months. I mean, that’s practically already. The Omicron variant of the coronavirus, the new restrictions in Europe, and the announcements regarding monetary policy have hit investors’ spirits. Every man for himself!
Does this mean the end of the bull cycle? Technically, yes. That is not to say that we cannot have hope. We can still continue to grow, despite the upcoming cuts from the Reserve. First of all, we have corporate income. If the economic recovery is successful and businesses continue to make money, this could keep optimism alive among investors. We will certainly not grow at the same rate as in times of loose monetary policy, but acceptable growth is possible. Second, we have fiscal spending. I mean, Biden’s plan. This injection of money could boost economic growth. And, in this way, encourage increases in global markets. Fingers crossed.
Technology, fintech, and crypto are “growth” sectors that perform very well in times of prosperity and optimism. However, they tend to suffer in lean times. In times of monetary austerity, investors usually turn quite conservative. They generally avoid risk (volatility) and seek refuge in more stable and secure assets such as cash, bonds, T-bonds, and value stocks (defensive, energy, etc.).
Now, let’s talk about the most popular crypto news of the week.
What came first? The chicken or the egg? Here we have a headline that is always a blockbuster. But it is a blockbuster because people see that it is popular. For the press it is extremely tempting to publish articles of this type. Because, apparently, it’s what people want. We all love a tip. In other words, people like to be lied to. The analyst in question, of course, does not know what will happen. However, your prediction must sound authoritative for it to have the desired effect. The thing has to be said with great security so that the news can reach many visits.
We well know that predicting is not difficult. The probable is not a certainty. Will those cryptocurrencies rise 30% in December? Maybe yes. Maybe not. Of course we cannot take it for granted. Do readers know that? Some do. Some do not. My duty here is to make a reminder. Beware of taking an analyst’s price predictions too seriously.
Here is something that we must take into account in relation to the predictions. The past is not the future. That is, history does not repeat itself. It can rhyme at times. But it is not repeated exactly. Models are not necessarily bad. But models are certainly not accurate all the time. Often gives false signals.
The followers of PlanB have received a blow of reality in this sense. The Stock / Flow model has been failing a lot lately. And the Floor model hasn’t been up to scratch either. In fact, the “worst case scenario”, at the end of the month, was USD 98,000. Ouch! And, exactly, Bitcoin is starting the month of December below $ 57,000. Many blindly believe PlanB’s predictions. It looks like a cult.
What is the problem? In fact, it is very simple. The answer is basic: The past is not the future. We can use the past to predict a probable future. But the odds do not take into account exceptional events. Well i’m afraid we are in very exceptional times. Hence, the models are not working. As simple as that.
Personally, he was very suspicious when an analysis offers tips. However, I read with great interest the investments of the big capitals. I am not saying that they are geniuses and that is why I must follow them. I must follow them, because it is an important “demand”. Large capitals tend to copy the portfolio of their colleagues. Typically, they do their homework and invest in the more serious projects. An analyst typically writes down what people want to hear so it can go viral. An investor, on the other hand, invests in something, because he is convinced that the project is worth it.
Yes. Most “random” traders lose money in this business. The hot and smart-headed young man talks very hard on the networks. However, in general, you lose more than you gain. From a financial point of view, it is not a very good idea to take advice from a youtuber or a crypto influencer on twitter. In most cases, they want to sell you their course or get more subscribers for their channel. They speak very beautifully. And they know how to play the social media game quite well. However, they do not offer the best financial advice. Of course, there are exceptions. But the vast majority do not know what they are talking about. In this business, the patient and moderate investor is the one who makes the big money.
There is clearly a lot of pessimism right now. Lots of negative news coming at the same time. However, there is no evil that lasts a thousand years. The market tends to overestimate the bad. In other words, pessimists tend to exaggerate. But sooner or later the market picks up its spirits. And the winds of optimism return. That means that, in effect, we could be talking about a short-term correction coming to an end. Fingers crossed.