THE 'WHY' OF SINKING BITCOIN | JUNKIES ASSET CLASSES WITHDRAWAL
Updated
The economy of Junkies Asset Classes
Published in early 2022, this is actually our forecast for the price of Bitcoin at that time.. You can check it on our medium for verification. Our fundamental compilation on bitcoin and asset classes in general and a pragmatical content, not married to ideals on both sides bulls and bears while the market is dynamic.
Several shifts happening in the market environment, the core fundamental point is:
These main theme changes will have a significant impact on asset classes. Including Bitcoin, which is one of the top asset class performances back in 2021 (see the infographic on the post image). Let's get into more detail on the bullet point.
Inflation overshoot in the global economy
This 2022 and forward will be dominated by the effort to fight inflation. Especially in US and UK. This alarmingly high inflation canceled all “transitory” themes the Central Banks try to maintain. All the money printings and liquidity injections get into asset classes as we see everything nonstop all-time high here and there, especially on equities and cryptocurrencies.
The rising wage and tight labor market, declining unemployment, less restriction from regulators around the globe now adding fuel into burning inflation. Not to mention the animal instinct of humans after being domesticated in the house for so long, will be compensated in more aggressive consumption and outdoor activities. In some sense, this is all good for the economy, but many economic forecasters are worried this will overheat and create the boomerang effect when the Central Banks failed to neutralize it.
The end of pandemic fear
We have published our stance on Omicron earlier, which seems in line with today’s situation. Although the infection numbers skyrocketing, the fatality rates are pretty mild. This is the natural universal vaccination and not to mention the vaccination numbers in the major big country economy is very high. The equilibrium between humans and viruses for survival is on the way to being achieved. This is bullish for the economy and is also connected to inflation. There are probable supply chain problems and bottlenecks here and there. However, this seems to be easing from time to time. If it ain’t so, it will be burning the inflation for more.
Hawkish Fed and the shift to tightening policies
This is the most fundamental point. Several weeks ago we saw the most dovish guy in the office, Fed Kaskhari, turn hawkish and aware of the danger of inflation. From zero expected rate increases in 2022 two increases. The dot plot or Summary of Economic Prediction shows an increase in the median expected path of the federal funds rate over the next few years.
This is the most fundamental point. Several days ago we see the most dovish guy in the office, Fed Kaskhari, turn hawkish and aware of the danger of inflation. From zero expected rate increases in 2022 two increases. The dot plot or Summary of Economic Prediction shows an increase in the median expected path of the federal funds rate over the next few years.
We will see outflow from asset classes, for more even last year we already saw some big money outflow from stocks. And withdrawal symptoms will start to kick in as there are not so many ‘easy money drugs’ anymore which creates crazy valuation in junkies asset classes. This money probably will be used more in the real economic sectors. Check out how indices and BTCUSD going down in rhythm:
The same goes for cryptos, multiple record outflow has happened. The incoming bear market will be more likely in the short and middle term. The only thing that can bring cryptocurrencies growth is another easing mode of central banks.
Published in early 2022, this is actually our forecast for the price of Bitcoin at that time.. You can check it on our medium for verification. Our fundamental compilation on bitcoin and asset classes in general and a pragmatical content, not married to ideals on both sides bulls and bears while the market is dynamic.
Several shifts happening in the market environment, the core fundamental point is:
- Inflation overshoot in the global economy
- The end of pandemic fear
- Hawkish Fed and the shift to tightening policies
These main theme changes will have a significant impact on asset classes. Including Bitcoin, which is one of the top asset class performances back in 2021 (see the infographic on the post image). Let's get into more detail on the bullet point.
Inflation overshoot in the global economy
This 2022 and forward will be dominated by the effort to fight inflation. Especially in US and UK. This alarmingly high inflation canceled all “transitory” themes the Central Banks try to maintain. All the money printings and liquidity injections get into asset classes as we see everything nonstop all-time high here and there, especially on equities and cryptocurrencies.
The rising wage and tight labor market, declining unemployment, less restriction from regulators around the globe now adding fuel into burning inflation. Not to mention the animal instinct of humans after being domesticated in the house for so long, will be compensated in more aggressive consumption and outdoor activities. In some sense, this is all good for the economy, but many economic forecasters are worried this will overheat and create the boomerang effect when the Central Banks failed to neutralize it.
The end of pandemic fear
We have published our stance on Omicron earlier, which seems in line with today’s situation. Although the infection numbers skyrocketing, the fatality rates are pretty mild. This is the natural universal vaccination and not to mention the vaccination numbers in the major big country economy is very high. The equilibrium between humans and viruses for survival is on the way to being achieved. This is bullish for the economy and is also connected to inflation. There are probable supply chain problems and bottlenecks here and there. However, this seems to be easing from time to time. If it ain’t so, it will be burning the inflation for more.
Hawkish Fed and the shift to tightening policies
This is the most fundamental point. Several weeks ago we saw the most dovish guy in the office, Fed Kaskhari, turn hawkish and aware of the danger of inflation. From zero expected rate increases in 2022 two increases. The dot plot or Summary of Economic Prediction shows an increase in the median expected path of the federal funds rate over the next few years.
This is the most fundamental point. Several days ago we see the most dovish guy in the office, Fed Kaskhari, turn hawkish and aware of the danger of inflation. From zero expected rate increases in 2022 two increases. The dot plot or Summary of Economic Prediction shows an increase in the median expected path of the federal funds rate over the next few years.
We will see outflow from asset classes, for more even last year we already saw some big money outflow from stocks. And withdrawal symptoms will start to kick in as there are not so many ‘easy money drugs’ anymore which creates crazy valuation in junkies asset classes. This money probably will be used more in the real economic sectors. Check out how indices and BTCUSD going down in rhythm:
The same goes for cryptos, multiple record outflow has happened. The incoming bear market will be more likely in the short and middle term. The only thing that can bring cryptocurrencies growth is another easing mode of central banks.
Note
The March hike is confirmed by 25bps on Jerome Powell testimony, with the question being, will it be 50bps? since with all the great jobs number, another US and global inflation spikes all over the place. There will be no easing cycle, and everybody is focusing too much on war, yes it's the fuel to make the already problematic monetary policies, but the main reason for all this is inflation and the shift into a tightening cycle.25bps hike is more likely, the fed will use the war as an excuse, they will be more aggressive later and increasing the gradual of rate hike this year.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.