Recession ahead
From inverted yield curve, to oil and commodities rise, you pick up your own signal – it doesn’t matter, cause someone has to pay for the Covid-19 free meal.
…and there’s a war in Ukraine, inflation transitioning to stagflation, and (biased) people fueling the stock market bubble with void hopium – we’ve got the usual recipe for a serious US stock market crash, that might roll out to a world’s recession.
It’s the economy, stupid
People trade BTC charts, or more absurd providing alts TA, while since 2022 the correlation between BTC to high risk Nasdaq stocks is on record high since Covid-19.
So what drives your alts prices (eliminating the buzz, tokenomics or other internal alts driven factors) is what drives BTC prices, which drives Nasdaq and controlled by the ‘open’ market – which is controlled by the FED. And Putin.
But the market did price in the interest rates already!
No it didn’t. Well it did – 25 bps and then 50 bps, however it didn’t really digest the root cause for the interest rates thoroughly; there was a local crash, followed by some recovery. The interest rates are not the problem.
The FED has to slow down the economy. It has to crash the markets. It has to curb the inflation. If 25 bps won’t work – it will raise to 50 bps. If that won’t work – it will go on use all the tools he has till it will work.
If the cockroach didn’t die on the first push on the spray, will you stop and let it go?
Oposite direction forces
Mid-term elections gonna mess this plan up. There will be some forces to ease on it, so by the end of the summer we might see a relief, however the recession will come, and it will take much more time to recover from it. I’m thinking in 2008 scale, and not the flash/minor corrections since then.
BTC on this bear scenario
Bitcoin was born after the last serious recession, the 2008 one; thus BTC didn’t encounter a real recession yet (Covid-19 is argued as a flash crash rather than a real recession).
Moreover, most retail investors didn’t experience a real recession as investors, so they imagine something completely different when they hear those terms.
Two scenarios –
a. The expected case
BTC will sink like a stone; as an extreme risk Nasdaq asset, it will continue to act like ARKK ETF on November 2021. Two school of thoughts –
- The ‘buy the dip’ group – nothing gonna change their mind. They’ll keep gonna look at the BTC indicators and compare them to past patterns to point the false turning point till full bankruptcy.
- HODLers – most of them gonna freak out and panic sell when we break down into the 20’s, some of them will just stop looking at the charts and will swear not to touch it again (those gonna be rich within few years – if they’ll find the keys…)
b. The decoupling event
Due to markets collapse, a world’s unrest will occur. On 2008 we had some economies collapses, from Europe till the Arab world.
The so called ‘Arab Spring’ started from a financial crises in Tunisia, and continued to Egypt, Syria and other countries. Some countries still didn’t get out of this, however those were ill countries so it just can heal them (due to their regime it might not be easy).
Some El Salvador alike countries or communities might opt out to BTC in such event. The first ones will be rich eventually, cause BTC will look like shit on this phase. If it will catch, then other countries/communities will join in, and it will start a global movement, that is designed by the book (or more precisely by the Bitcoin white paper) to fix the financial system and create a global currency that is protected by inflation (…and make the rich people richest and the poor people more poor, but never mind.)
And what about the ALTs?
Oh, they will definitely go to zero.
So what to do with it?
As usual – no action immediately, except from preparing. Don’t lock funds, don’t buy shitcoins, take profits whenever possible, don’t short unless you know what you’re doing, trust a USD backed stablecoins (BUSD, USDC, USDT – on this order).
I’m still bullish on Bitcoin for long term, and DeFi of course. However we need to face the reality, the near future is not so bright for this market, let’s protect ourselves.