Under inflation, how to operate the market outlook?

Bad news came out of the market on May 13: First, the US Department of Justice and the Internal Revenue Service will investigate Binance; second, the negative premium of GBTC has expanded to 20.48%, a record low.

I don’t know if it was affected by these news. At that time, the market began to fall sharply, but I still think that such a decline is a good thing. I hope that the market can calm down during this decline, and investors can sort out their emotions during this decline. , to better meet the next second half.

Such a decline is not worthy of our too much attention, but another thing worthy of our attention: that is, the inflation index recently announced by the United States exceeded 4% - this data greatly exceeded the 2% inflation target set by the Federal Reserve , It also greatly exceeded the expectations of the market, thus triggering market concerns about the Fed's interest rate hike, so as soon as the news came out, US stocks plummeted.

Not only the United States, but my country's recent National Standing Committee has also begun to emphasize the need to prepare for the price increase of bulk commodities. The series of measures introduced by my country also shows that the country is consciously tightening market liquidity to prevent inflation from getting out of control.

All of these data illustrate one point: currently,The development speed of inflation has far exceeded the forecast of the market. If it is not controlled, inflation will have serious side effects on the economy.

What does this have to do with us digital currency investors? The relationship is very close, because the future direction of the overall digital currency market is not only related to the development of some projects in the market (such as the second layer expansion of Uniswap and EIP1559 of Ethereum I mentioned yesterday), but also related to the release of currency degree.

How big the bubble of this round of bull market can blow up in the end? Now, in my opinion, the next key factor is the degree of water release, and the degree of water release is most fundamentally determined by the US government, and the US government’s public statements so far will affect the release of water. What matters is inflation and economic trends.

So after the release of the US inflation index, what will the US government do next? We seem to be able to see a thing or two from the most common logic. That is, although the situation is extremely embarrassing, I am afraid that the US government will not dare to say that the policy is tightened lightly.

On Weibo, Dr. Zhang Wenhong recently said in a video that before the outbreak of the epidemic in India, the global expectations for epidemic control were relatively optimistic. Not likely anytime soon.

If the world cannot return to normal traffic, the economy will not be able to get through the meridians, and the economic development will not be optimistic. Therefore, under this premise, if the government tightens policies and curbs the release of water, the economy may deteriorate again. For the United States, if the policy is tightened, not only will the economy deteriorate again, but the stock market will plummet. And the stock market is one of the few bright spots in the current US economy, so the risk of tightening policies will be very high.

So I estimate that what the US government will face next will be an awkward dilemma: on the one hand, the economy remains weak; on the other hand, inflation soars. In this situation, we should choose the lesser of both sides - we will continue to release water and endure inflation.

Then what we see will be a situation where everything is skyrocketing: it has risen to an unbelievable level today.

Is it possible that the U.S. government will start to control it with a ruthless hand? I don't think this possibility can be ruled out, and once the U.S. government really does this, the consequence will be an overall plunge in the market.

In order to cope with the above two possible situations, I suggest that investors can adopt a more compromise approach in the next market:Some assets will be held until the U.S. government really adopts tightening policies before being realized, while the other part will be realized in batches when the market is judged to be close to the estimated high point according to the law of previous bull markets.