You tiny thing
Today we start with a Cointelegraph article/interview with Crypto champion, noted investor, and macro analyst, Raoul Pal who discusses the sell-off in crypto why its likely in the doldrums for a while but also why despite the many detractors out there, its not going die or cease to matter. How long will the crypto bear market last? Raoul Pal's macro analysis (https://cointelegraph.com/news/how-long-will-the-crypto-bear-market-last-raoul-pal-s-macro-analysis) "In an exclusive interview with Cointelegraph, macro investor Raoul Pal analyzes the macro factors that are keeping the crypto markets under pressure and the triggers that could spark the next Bitcoin rally. Macro investor Raoul Pal is convinced that the current crypto bear market will end only once the Fed eases its hawkish monetary policy by halting interest rate hikes. That could happen in the next couple of months, according to Pal's predictions. “The Fed are unlikely to raise rates as far and as fast as people expect. My guess is they probably stop raising rates sometime in the summer and that will be it,” he said in an exclusive interview with Cointelegraph. Pal sees the combination of high interest rates and fear of an upcoming recession as the main macro factors that are causing the current crypto bear market. “Retail investors’ income has not gone up as much as prices, so they've lost discretionary income. So, people can only dollar cost average less, can get less involved,” he said. Pal thinks that the market's bottom has not yet been reached and that a mass liquidation phase involving crypto and legacy assets could be coming soon. “[Crypto] could see liquidation spike at some point if we see one in equities and then eventually that will be the final capitulation of the market,” he said. At that point, according to Pal, the Fed will ease its monetary policy, allowing some liquidity to flow into financial markets, thus sparking the next crypto rally. "We'll see bonds rally, crypto rally, maybe some of the technology stocks rally," said Pal. Besides the macro picture, other factors that could facilitate the next bull run are the approval of a Bitcoin spot ETF and Ethereum’s switching to a proof-of-stake system, which is expected for Q3." So, without saying it directly, Raoul Pal is saying crypto is a risk asset and as such is going to underperform and struggle with a hawkish fed and the likelihood of an incoming recession. In addition, the inflationary environment will constrict deposable income used to play in this new environment. What he also says in the interview (use the link above to view the actual interview), is the reason crypto is so dynamic and why it is not going to whither of the vine. ADOPTION RATE. The adoption rate for crypto after 5 years is growing exponentially, faster than the internet at this stage of its emergence. As Raoul has put it in the past:
"This concept in crypto can be best represented by this chart. Already it is the fastest rate of adoption of any technology in human history (113% per annum vs 63% for the internet)."
So for all the naysayers it's not going away, it's going to keep on being adopted by the mainstream and it's going to keep on innovating! Sure it might be suffering a sharp kick in the solar plexus at the moment, sure things are the wild west and honestly poorly designed, scams etc. But its the tip of the spear; as Bladerunner 2049 Luv character said: You tiny thing. In the face of the fabulous new your only thought is to kill it? For fear of great change? You can't hold the tide with a broom." Now for the not-so-good news. Inflation is entrenched and central banks are irrelevant. So this could be a prolonged hibernation of sorts in the cypto and equity space. To explain (again). This blogs base case is in line with Russell Napier's idea - Govts will and are taking control of the money supply, and they will run economies hot which means inflation will continue (it needs to erode the astounding amount of debt in the West). Financial repression will continue to tax the people (esp the elderly/savers - wealth transfer), meaning disposable income will be lessened. We offer this recent commentary from Bloomberg, discussing inflation: Goodbye Central-Bank Independence, Hello Inflation: Macro View (https://www.zerohedge.com/markets/goodbye-central-bank-independence-hello-inflation-macro-view) "By Simon White, Bloomberg Markets Live Commentator and Reporter There have been three great inventions since the beginning of time,” observed the economist Will Rogers: “Fire, the wheel and central banking.” We should insert “independent” before the last of these, for it is autonomous central banks that have presided over the developed world’s low-inflation regime for the last 30 years. Yet as governments begin to re-assert their influence over monetary policy, this will be an increasing source of inflation and market instability. The prospect of returning to a low-inflation regime any time soon is diminishing rapidly. The differing experience of the UK and the US in the 1970s illustrates this. The US receives much of the attention, but it was the UK that suffered the highest and most persistent inflation of the major developed economies in that decade.
Both countries faced the same inflationary shocks, such as the Arab oil embargo in 1973, the Iranian Revolution in 1979, and the de-linking of their currencies (the dollar broke with gold in 1971, and sterling broke with the dollar in 1972). So why was inflation significantly worse in the UK? In each country the first inflationary seeds were sown by an overestimation of the output gap. In the US, the estimate of NAIRU -- the non-accelerating rate of inflation for unemployment -- was significantly lower than later estimates. That meant the Fed thought it had much more room to ease than it really had, even while the government was rapidly expanding its spending in the run-up to the 1972 election. In the UK there was a bigger overestimation. That facilitated the “Barber Boom” in 1971-74, named after then UK Chancellor Anthony Barber, of large tax cuts into a growing economy with inflation already running over 5%, as well as a major liberalization of the credit system that massively expanded bank lending and government borrowing. The UK’s inflationary problems were compounded by rapidly rising wages causing a significant fall in the trade balance, which drained reserves and ultimately led to the sterling crisis of 1976 and an IMF bailout.
But wages and output gaps are not sufficient to explain the UK’s dismal experience in the 70s. The key factor was the much lower degree of central-bank autonomy. The Bank of England in the 1970s had little political or operational independence. Its room for maneuver was constrained by the short maturity profile of government debt. That gave the BOE limited scope to raise rates; when it did, it led to an automatic fiscal easing as the government’s debt-servicing costs rose. In any event, the Chancellor had the ultimate authority to set interest rates in the UK, while in the US the Governor of the Fed had that responsibility (even though they could be leaned on). The Barber Boom of a simultaneous fiscal and credit easing supported by low interest rates could not have happened so easily in the US. In the UK, on the other hand, it essentially required the say-so of only two men: the Chancellor, and the Prime Minister. This was not only a UK and US phenomenon. The Kennedy School at Harvard in a paper from 2018 found that from the 1970s to the 1990s there was a notable relationship between central-bank independence and the level of inflation, with less independent central banks associated with higher inflation, and vice versa.
Kennedy School, Harvard University; Bloomberg We don’t know whether it was structurally low inflation - driven by demographics and technology - that allowed governments to grant central banks more independence, or whether it was central banks that led to low inflation. Either way, history shows that rising government influence over monetary policy has tremendous inflationary potential. The last hundred years are littered with examples - from Weimar in the 1920s to Hungary in the 1940s, to the “Stop-Go” monetary policy of the US in the 1970s - of central-bank-funded government largess leading to runaway inflation. Decades of relative market tranquility thus threatens to be upended as the erstwhile stewards of financial stability -- central banks -- are elbowed aside in favor of the capriciousness of vote-hungry, inflationary-biased governments. That they did not make it on to the list of greatest-ever inventions is of little surprise." So basically in these turbulent times, we continue to see our offering as the store of value to combat it: FIX00 is digitalising real-world rubies, proven stores of value for centuries, and offering them to the public via our utility token and importantly our forthcoming F-NFT platform which allows for the ownership and transfer of their value. These unique assets should be an important part of your defensive armour as volatility and downside risks increase. All aboard the Digital Ruby train ...... Whoo, Whoo ....... All aboard!
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