Markets are formed with expectations. And these expectations are born of interpretations. That is, investors weigh the situation. They reflect. Questions are asked. For example: Is inflation transitory or permanent? Well, apparently, it’s permanent. And that means the Federal Reserve of the United States and the other central banks will have to take action in this regard. It means that they will be forced to raise rates and reduce their books for as long as it takes to contain the situation. Inflation is the key indicator here.
Now, inflation is a multifactorial phenomenon. And the causes can be many. What kind of inflation do we have right now? Okay, The variable with the greatest weight at the moment is supply (lockdowns due to Covid in China, the war in Ukraine, the price of goods, failures in the distribution and production chains). The problem is that central banks have no control on that side of the equation. So, a decrease in demand via monetary policy could have a strong impact on growth. Namely, the possibility of a recession is increasing. In this case, we would be talking about stagflation (inflation + decrease).
How about a “soft landing”? While it is true that debt and savings are in better shape than during the 2008-2009 crisis. We cannot overestimate our luck. Because this time the situation is different. The “inflation” component must be taken into account when making comparisons. So the recession may not be so smooth. And, to add insult to injury, now we don’t have the possibility of bailouts like before due to inflation. In the 70s, we had a lot of inflation, but the (private) debt was not that high. During the crisis of 2008-2009, we had a lot of debt, but we did not have inflation. Now our options are more limited.
Will stock indices continue to decline? The trend of -35% for a bearish cycle must be revised, because in a situation of high inflation all numbers should be revised. Additionally, in such exceptional situations, the levels of uncertainty tend to be higher. And investors are becoming increasingly conservative. The amount of cash in the portfolios and the strength of the dollar are proof of this. Then, It is not unreasonable to think of the possibility of a crash of at least 50% for the stock markets. I mean, this story is not over.
Whether we like it or not Bitcoin is a risky (risk-on) and volatile asset that does not behave very well in such scenarios. The scarcity of the code, the computing power of the network, and the security of the private keys are very important to libertarians and the most devout. However, those attributes matter three cucumbers for the rest of the investors whose priority is the price. Price is the most important thing for the average investor. And the volatility of Bitcoin is too high a risk to take at a time like these. As simple as that. In other words, it’s too early to declare your apartment. Y Bitcoin’s resurrection will surely begin the moment we have a light at the end of the tunnel in terms of an eventual improvement in macroeconomic conditions.
Now, let’s talk critically about this week’s top crypto news.
Cristiano Ronaldo will bring football fans to Web 3.0 thanks to a partnership with Binance
Promoting during a down cycle does not have the same vibe as promoting during a bull cycle. Because advertising at a party is not the same as advertising at a funeral. During a bear market, investors seek protection. The priority is not to lose money. During a bull market, investors seek risk and adventure. The priority is to grow. These are completely different shades. For this reason, launching new products is often much more difficult in lean times.
Of course there are responsible promoters and there are irresponsible promoters. The crypto market is riddled with irresponsible promoters. I am referring to the people who are always making bullish predictions and, at all times, are recommending buying Bitcoin. They always want to capture the capital of others. But they care very little about the financial well-being of investors. For example, a Michael Saylor recommending people to mortgage his houses to buy Bitcoin at $50k-$68k.
Treasury of Spain now demands that crypto operations be declared even if they have given loss
In this life there is nothing certain, except death and taxes. Uncle Government will always want his piece of cake. Sooner or later, they will knock on your door. The healthiest thing is to always be up to date with that paperwork.
Anonymous vows to expose Do Kwon’s ‘crimes’
Faced with such a disaster, the people ask for blood. Y someone’s head has to roll. The Luna/Terra case has to be investigated, because that cannot be left up in the air. Many people lost their savings and we cannot fall into the savagery of blaming the victim. What can Anonymous do? I do not know. But the competent authorities must put effort into the case.
Colombia prepares a new law for exchanges and cryptocurrency companies
There are good regulations and there are bad regulations. Bad regulations stifle innovation and encourage monopolies. In general, they are laws that are passed in a hurry. Without much debate. Without much consultation. It all sounds very nice on paper. But it is usually a disaster in practice. We hope that this law is a good regulation. A regulation that truly protects the consumer and boosts the industry.
Cryptocurrency exchange FTX is looking into acquiring Robinhood
Interesting move by FTX. But this story is just beginning. Whether Robinhood accepts the offer remains to be seen. And we can’t rule out other contenders in the event of an acquisition. I wouldn’t be surprised to see JPMorgan Chase on the list. But you can also join Charles Schwab or Interactive Brokers Group.
That is what happens at times of low tide. The big fish eat the little ones. In bull runs, we are all geniuses of high finance. Nevertheless, in bad spells, those who were swimming naked are discovered.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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