BTC & U.S. Indeces - Synchronised Swimming Team
Why do traders need to understand this SYNCHRONISED plummet?
Since the start of the year, these asset classes have been going down in rhythm as we enter the year of back to normal monetary policies by central banks. The normal monetary policies means, no more easy liquidity injection or less money printing. The Federal Reserve projected to hike interest rate to minimum three times this year. Four interest rate hike is also on the table by the prediction of many economist, as the fed already far behind the curve.
The bullet point why this impacting those asset classes?
- Over valued asset classes
- Overshooting inflation & Monetary shift
- Bitcoin fail to claim itself as ‘Inflation hedge’
Over valued asset classes
The stream of liquidity injection on covid pandemic has flow into asset classes more than ever in the history. This pumping the asset classes into astronomical valuation. We can observe abundant of hypes at here and there, stonks, irrational moonbois, meme based intrinsic value asset, non-sense jpg NFT, and all of that. All of this is the compensation of the easy money failed to be delivered to the real economy. It’s all about speculation and does not create more good and services.
Overshooting inflation
At the most fundamental level, inflation is a widespread increase in prices across the economy. Currently at 7%, US inflation rate hits fresh 1982-high. Expect to see a rise in prices through the middle of 2022, and Fed chair Powell has said that he will do what is necessary to keep prices down, including raising interest rates, started on March.
Although pandemic-induced supply constraints, soaring energy costs, labour shortages, increasing demand and a low base effect from 2020 is a part of the 7% inflation, the current job market is below the full-employment standard. The jobless rate is at 3.9%. Which mean, the economic is hot now, if it is not overheating. This inflationary pressures need to be tamed by aggressive tightening policies.
Bitcoin fail to claim itself as ‘Inflation hedge’
A lot of people think that investing in Bitcoin is a good way to protect against inflation. There are only 21 million bitcoins left when they’re all mined, so there’s a limited amount of them. But that’s what we see. Based on the fact that inflation has been rising since last year, bitcoin keeps on heading lower. With all the pros over traditional finance, it’s still far too risky to be considered an inflation hedge.
It’s normal to see indexes fall or rise together as they consist of stocks that are highly impacted by the economic condition and macroeconomic policies. But bitcoin has now joined them, and we can classify it as correlated overvalued assets.
Our prediction on the start of the year that proven to be true:
Bitcoin Prediction 2022 Update | The Withdrawal Symptoms
