Bitcoin is steadily holding above $45,000, but... Inflation, fear and panic in the markets
12.02.2022 • Просмотров:

Bitcoin is steadily holding above $45,000, but… Inflation, fear and panic in the markets

By Decimal

The situation in the markets is completely insane, caused by the fact that the inflation data in the US exceeded expectations, first causing a round of sales, and then a rapid rebound of the entire sector, which took place in the stock markets in parallel.

The data came shortly before the opening of trading on the New York Stock Exchange and NASDAQ. YoY inflation was 7.5%, and monthly growth was 0.6%. Nothing could be more frightening for the markets. Not directly, but in terms of the fact that this could lead to real consequences in the hands of the Fed.

Inflation in the United States for February 2022. Source: Take-profit.org

Inflation in the United States for February 2022. Source: Take-profit.org

In the face of such relentless data, the US Federal Reserve will have to take more decisive action than anticipated just a few weeks ago, forcing the economy to contract even more by raising rates and reducing purchases of government bonds.

These steps are aimed at outflow of liquidity from the markets and, consequently, lead to a decrease in the value of assets. The chart below shows how the SPX500, the most representative index of the US stock market, and Bitcoin actually moved in unison, following the classic market reaction to news of this kind.

Comparison of BTC SPX500. Source: Take-profit.org

Comparison of BTC SPX500. Source: Take-profit.org

A perfect parallel between BTC and American exchanges. Is everything really lost? Not at all, because the markets actually rebounded about 30 minutes after the opening, dragging Bitcoin and the rest of the cryptocurrency sector with them again. Now, according to Coinmarketrate.com we have returned to the $45,000 level, but it is unknown what will happen during the day, which will remain volatile and unpredictable.

Inflation is completely out of control, but central banks…

Inflation seems to be completely out of control, and the central bank’s threats to tighten measures are expected to become a reality soon. Guggenheim said that a rate hike in March could amount to at least half a percentage point – but, in our opinion, the markets have already reduced this probability.

There remains one more part of the story that few people seem to want to discuss: while it is true that central banks have at least some means to limit inflation, it is also true that the situation with public debt ties their hands.

What will happen, think about Europe, with the public debts of Italy, Spain, France, in a situation of higher rates? Will they be sustainable? The answer that no one wants to hear is probably no.

In such a situation, it seems absurd to think about the “hawkish” policy of central banks. This will require balancing, which may not be possible even for the strongest economies, and will not have a clear way out, at least for the moment.

What does this mean for the cryptocurrency market?

Although the correlation is not constant, in the presence of these major market events, the correlation becomes almost 1:1, as we demonstrated above in the attached graph.

Will uncertainty persist in the markets? In all likelihood, yes, although Bitcoin seems to have a few more shells to fire than, for example, the technology stocks sector.

The fact that in such situations we can still see Bitcoin above 45,000 is a big, very big advantage. Both the news from Tennessee and BlackRock’s decision contributed to this.

The law allowing the state to invest in cryptocurrencies

In Tennessee, there is a proposal to allow all representative bodies, starting with the state legislature and ending with the smallest district, to invest in cryptocurrencies and NFT.

Perhaps this will be the first international experience, which, if adopted, will change (and significantly) the way government agencies invest. But it’s not just about Bitcoin.

The proposal submitted to the Tennessee legislature has predictably already received wide publicity in the world, it is mistakenly compared with the law that made Bitcoin legal tender in El Salvador.

This is not the case: the bill talks about expanding the category of assets in which government agencies can invest, for example, assets at the state level, as well as smaller ones, such as counties. If the law is passed, it will not make Bitcoin legal tender.

This would be an expansion of opportunities for investment in assets by state and local governments, which has little to do with giving Bitcoin the status of legal tender. But, nevertheless, this is good news for the entire market, because enterprises of a certain financial significance will be able to participate in this market.

This, of course, is subject to the adoption of the law, which will have to be evaluated later when it goes to the local Tennessee parliament for discussion.

In the US, there is a struggle to become the preferred place for bitcoin business. There is another proposal that calls for discussion of the implementation of rules and frameworks, making Tennessee the most attractive place for businesses revolving around the world of BTC and other cryptocurrencies. This is a relatively general statement of intent, but it shows the great political importance that this sector has acquired in recent months.

There are several candidates, governors and senators in the US who are eager to demonstrate their support for Bitcoin and the cryptocurrency world. From Suarez, the mayor of Miami, to DeSantis, the governor of Florida, not forgetting Senators Ted Cruz and Cynthia Lummis.

The political climate is changing, and the midterm elections in November may get hot. And all this at a time when the Fed is reporting not very good news for the economy of the fiat currency. This will be an important 2022 year for Bitcoin & co., including in political terms.

Bullish News for the Crypto Sector: BlackRock to Offer Bitcoin Trading

The inevitable acceptance. We are one of those who have been saying this about Bitcoin for some time, which will then pull the rest of the industry with it.

BlackRock, the world’s largest fund and asset manager, has confirmed this. In fact, the group through the Alladin platform should soon offer its clients the opportunity to trade cryptocurrencies, starting, it seems, with a core of several selected protocols.

BlackRock was the last to board the Bitcoin and cryptocurrency train. We can say that the thunder struck so hard that it began to rain. There were many Bitcoin maximalists and cryptocurrency enthusiasts who talked about widespread adoption even among the big, very big names of global finance.

Therefore, BlackRock’s move was almost mandatory. BlackRock is (we remind our readers) the world’s largest financial interest group, which owns stakes in all the world’s largest listed companies.

The group will offer through Alladin the opportunity to trade Bitcoin and possibly other cryptocurrencies, which should support the market, which is recovering from the lows reached a few days ago.

According to rumors that have not yet been confirmed, at the moment it is unclear at what time the service will be launched, but it seems that it is already in full swing, given that the group has already hired specialists in June last year.

What will change for the world of cryptocurrencies with the arrival of BlackRock?

Not too much in the short term, although in the medium and long term, the crypto world will have to reckon, in a positive sense, with a significantly expanded audience of investors with direct access to this market.

This is the consecration of Bitcoin and cryptocurrencies as financial assets that can be included in the portfolios of the largest institutional investors, a kind of confirmation of their solvency and at the financial level by an international society representing the elite of finance and holdings.

With the arrival of BlackRock, it will become even more difficult to talk about a “bubble” and that states regulate this world in an extremely restrictive way. Because, in the end, even the most important fund management and brokerage services company will have the main crypto assets on its list.

This is extremely important news, even if it will not be the last in 2022, the year that in retrospect will be considered the year of the final change of this world.