This week was bottom and bounce. Of course, inflation (USA) got out of control and the US Federal Reserve is forced to withdraw liquidity from the system sooner than anticipated. Of course, the news is not new. What was new was the market’s reaction to the publication of the December meeting minutes. Investors were quick to think the worst. In this case, the worst is a very aggressive withdrawal of liquidity. Nevertheless, the speech of Jerome Powell, director of the Reserve, before the Congress in the event of its ratification calmed the markets. We saw a firm but moderate Powell. That is, a Powell in command and in control of the situation.
This roller coaster of emotions is not unusual in times of uncertainty and conjunctures. Investors jumped from pessimism to opportunism in a matter of hours. Now we are in a very insecure state of nervousness. We are in a very mixed environment. And there are many mixed signals. It is true that the inflation data showed us particularly high numbers, but at least there were no surprises. In other words, the numbers met expectations. Something very similar happened with the labor market reports. Again, mixed signals. What it normally means: volatility.
Obviously we have a “Tech sell-off”. And here we can include crypto as an honorary member of this club. Tesla, Microsoft, Amazon, Apple, Google, and Bitcoin are the first to feel the consequences of runaway inflation. Nasdaq, for example, is down 5% so far this year. ouch! Of course there is no evil that lasts a hundred years. Patience, patience and more patience…
Now, let’s take a critical look at this week’s most popular crypto news.
Of course a stronger drop is possible. However, these statements were issued before the rebound. In other words, the $39K support held up beautifully. This makes our decline to the $35K level more unlikely. Still possible, but more unlikely. At first glance, what they say here about Axie Infinity, frankly, seems to me to be very wishful thinking. But everything is possible in the midst of so much madness.
I find this analysis interesting:
“The members of the FED had already said that inflation is strong, that the labor market is squeezed and that it is difficult to hire, that the economy is growing and that it is necessary to reduce aid. There was also talk of the need to raise the interest rates earlier than expected.Furthermore, supply chain pressures will continue this year, which should lead to further inflationary pressure.As a result, the US stock market has fallen, which is spilling over into the cryptocurrency market.The impact in cryptocurrencies is intrinsically linked to what happens in the US stock market. If the US stock market crashes, fatally the cryptocurrency market will also crash,” says Andrey Nousi, CFA and CEO of Nousi Finance.
It is true that Bitcoin is the most stable and consolidated asset in cryptoland. Its increase in capitalization has given it relative stability, but has reduced profitability. Therefore, retailers have been trying their luck in the altcoin market. Now, Bitcoin grew by 60% in 2021 with a fairly loose monetary policy. During the same period, some altcoins grew a lot. Everything seems to indicate that growth will continue. Obviously not with the same speed because monetary policy this year will be less flexible. But it would be very premature to declare a bear market. which makes me think that that “200%” in the case of some low-liquidity projects is not entirely unreasonable.
In times like these, there is never a lack of a prophet of disaster. True, during the last bearish cycle, we experienced an 80% drop. 1) Are we at the beginning of a bearish cycle? 2) Have we not gained liquidity in recent years? Today’s Bitcoin is not the same as 2017-2018 Bitcoin in many ways. I remember that in 2018 we expected a drop of more than 94% by using the graphs of the previous cycles. I doubt very much that this time the copy and paste technique will work properly. In this opportunity, we have a much higher capitalization. It is a market with more liquidity. Therefore, a much more stable Bitcoin. Under these conditions, 40% can be the new 80%. Fingers crossed.
The popularity of this trivial article may be due to the climate of nervousness in recent days. The word “Coinbase” next to the word “will close” scared me for a second. But I read the headline again and understood. I assume many have been through the same thing. Well I do not know. Personally, the vicissitudes of the Coinbase staff do not interest me much. Good for them, but it’s not my problem. Frankly, I feel like I wasted 5 minutes of my life reading this.
This note could be relevant in the context of the new reports on the US labor market. The pandemic changed us in many ways. One of these changes relates to our attitudes toward work. People need to work. But, at the same time, they don’t want to live as slaves to unbridled capitalism. Salary is important, but it is not the only thing. Leisure time, child care, and other benefits are now part of the requirements.
These are complicated times. And we should expect volatility. All is important. Because here anything can happen. The tension in the markets will cause ups and downs. Calm down, people. We have to be patient because these months will surely be turbulent. Patience. Fortune favors patients.