The Fed is releasing doves again, inflation is almost a foregone conclusion, where is the cryptocurrency market headed?

2021/2/24

The hearing is over, and the congressmen asked all the sharp questions, but Powell's answers were all evasive and word games.

2. The expectation of economic recovery will be advanced. Commodity rises and bubbles are inevitable, but the Bitcoin bubble is not due to economic recovery.

In the end, the opinion of the Federal Reserve has not changed. It can be said that it is still an old-fashioned issue. However, we still cannot directly draw a conclusion on the issue of whether the bull market in the currency circle will stay. However, it is foreseeable that inflation is It will happen, but the degree is uncertain, and the consequences of inflation must be clear to everyone. The current crazy printing of money by the major central banks headed by the United States is undoubtedly giving people a feeling of walking on a tightrope on a cliff. Feeling, endless panic, it is actually not very good for us in this big world economic environment. After all, when we wake up one morning at any time, the wealth we have accumulated through hard work may depreciate to an unimaginable level, just like Germany after World War I was the same as China during the Republic of China.

Kids use wads of banknotes as toys after German inflation crisis

02

Before talking about our topic of cryptocurrency, let’s talk about the US stock market, which is closely related to the Federal Reserve

In the article in 2019, I once thought that the U.S. stock market has already had a very big bubble, but the U.S. stock market has kept rising. Until the outbreak of the new crown epidemic last year, there were unprecedented multiple circuit breakers in US stocks from February to March. Regarding the circuit breaker during this period, I used to think that this would be the trigger point for the bursting of the US stock bubble. However, the Federal Reserve and the U.S. government have resorted to unprecedented big moves: on the one hand, they are directly zero interest rates and printing money even more frantically; on the other hand, they are directly throwing money at ordinary people again and again. Under such measures, the U.S. stock market miraculously "resurrected", not only making up for all the previous declines, but also continuing to hit new highs. As of writing, the Dow Jones Index is almost close to 31,500 points.

If we look back at this period of history from a more macro perspective, the U.S. stock circuit breaker from February to March last year can only be regarded as a "callback", and it did not affect the continued trend of U.S. stocks. It has been a bull market since then, no matter how absurd, abnormal, or irrational this bull market may seem. Judging from the trend of the U.S. stock market, if an investor invests in the Dow Jones Index Fund, as long as he can resist the psychological pressure caused by any decline and firmly hold on to the chips in his hand and not sell them, at least until now he has been winner.

We assume that one day in the future, the US stock market will crash again, what will happen then? I am afraid that everyone can guess without thinking: the Federal Reserve can even lower interest rates to negative values, and then the US government will use more exaggerated methods to print and distribute money. What about the extra money?

Continue to flow into the stock market, the stock market hit a new high. According to this logic, this bull market is not over. As long as an investor enters the market at any time, as long as he holds his chips and does not sell them, he will eventually be able to make a profit, because whenever there is a sharp drop, the U.S. government will print money crazily. This logic is so ridiculous that I can't believe it myself, and I have never experienced such a stock market. But at least until now, this logic has not been broken. Although I believe it will break, when it breaks and in what form, I am afraid it will be a scene that we have never seen in history. Just in the past few days, another piece of information worthy of attention came from the financial market: LIBOR-OIS, a key indicator for measuring interbank liquidity in the United States, is likely to fall into a negative value in history. If that happens, it will send shockwaves around the world like last year when oil went negative. What does this indicator mean academically? We don’t need to pay too much attention to it. What we need to pay attention to is why this is the case?

Because the United States will have to implement massive money-printing measures next year.