According to a survey conducted by Bank of America, sentiment is still quite “bearish.” Global fund managers see a recession in the context of a stagflation scenario as quite “probable” by 2023. What does this mean for the price of Bitcoin and other cryptocurrencies?
Due to my work as a columnist, I am obliged to constantly monitor social networks with the intention of identifying trends and weighing sentiment. I must confess that the task is not very pleasant. Generally speaking, heWhat I read is pure bullshit. Twitter, above all, is a haven for trusting ignorance. People who know very little think they know a lot. And, in a not very friendly tone, the different tribes repeat the same dogmas to attack the dogmas of the other tribes. The truth of the tribe is the truth of the universe. And the one who doesn’t think like “I” is my mortal enemy.
It is no secret to anyone that with each drop in the price of Bitcoin there is always a group celebrating the event in the spirit of “buy the drop”. And of course, confident ignorance does not leave much room for doubt. The custom is to speak in absolutes. With iron security. ohBitcoin to the moon! Simple and easy.
The bullish bias assumes that any decline is a temporary setback. The permanent are the rises. Bass players, therefore, are people who suffer from a chronic mistake. This inveterate optimism around the Bitcoin price is mainly due to past glories. The last 13 years are presented as a story that will repeat itself from here to eternity. I mean, the future will always be with the past. No doubts. Our brief past is enough to predict the coming decades. If the price of Bitcoin has gone down a lot, that means that Bitcoin is “cheap”. No doubts. And, to define that “cheap”, the patterns of the past are used.
On the other hand, Bitcoin is scarce. Things go something like this. The artificial scarcity of the code will keep the price high in the long run. This is in the tradition of the Austrian school of economics in regards to marginal value theory and the subjectivity of value. The dilemma of water and diamonds, etc. Then, we talk about inventory and flow (stock / flow). There is talk of the halving.
Finally, we have the libertarian utopia. Bitcoin, for many, functions as a messianic instrument fighting a crusade similar to the old crusade posed by the gold beetles. It could be said that it is a political and economic insurrection via monetary insurrection. The intention is to separate the State from the economy, taking the theories of classical liberalism to an extreme. In other words, this is an idiosyncratic Bitcoin. Y it is not uncommon for the idiosyncratic bitconer to speak for the entire planet. In other words, he assumes that everyone thinks like him. And it is assumed that the masses are eager to join his revolution. So, sooner or later, Bitcoin buyers will supposedly arrive en masse seeking to abolish the evil system established to impose the libertarian utopia.
Now, the “cheap” or “expensive” of the Bitcoin price is not established by yesterday’s price. It is established by tomorrow’s price. If the intention is to grow financially, the ideal is to buy “cheap” today and sell “high” tomorrow. Which implies that, for today’s investor, tomorrow’s price is more important than yesterday’s price. And that price tomorrow will depend on tomorrow’s demand. In this case, past glories fade into the background. Namely, any Bitcoin price forecast must perform an analysis of future demand. In other words, it is not the past. It’s not the programmed shortage of code. It is not the libertarian revolution. It is the future demand. Where will the buyers come from?
Let’s go back to the past. What fueled the 2017 bull boom? What fueled the 2020 bull boom? What was the narrative? The institutional demand. The arrival of institutional demand served as a motivator during the last two bullish cycles. We are now in a bearish streak trying to predict the bottom and the beginning of the rally. That means we need to find signs of a return in demand.
What are the expectations of institutional capital at the moment? Expectations are important, because expectations influence decisions. And decisions have an effect on prices. In other words, markets tend to fulfill their own prophecies. Optimism produces purchases. Pessimism produces sales. Which implies that optimism produces bull markets. And pessimism produces bear markets. Optimism favors risky assets. Pessimism favors stable assets and fixed income.
The Bank of America survey offers us a window into institutional capital expectations and sentiment. What do global fund managers think about the future? We must remember that expectations function as orientation points for today’s decision-making.
Bank of America survey finds that 92% expect stagflation in 2023. Fund managers overwhelmingly anticipate the coming year to be a period of stagflation.
A whopping 92% say they expect below-trend growth and above-trend inflation next yearaccording to the survey of 309 people who manage $854 billion in assets.
Fund managers were also asked what their biggest risks were: Inflation remains high at 32%. Three other fears share 18%: worsening geopolitics, hawkish central banks and a deep global recession.
Given macroeconomic conditions, fund managers they remain cautious. According to the survey, asset allocation remains very defensivealthough last month there was a shift towards industry and banks and away from public services and technology.
Caution prevails in this picture of uncertainty and volatility. In other words, the institutions are obviously not yet ready to start a new bullish cycle. With “cautious demand”, it is very difficult to announce the start of the recovery. Why? Because, without buyers, there is no boom. Of course, rallies also form in every bearish cycle. But a few weeks in the green is not the same as a trend reversal. whatIs it possible to make a “bullish forecast” with a “bearish demand”?
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