The market isn’t up anytime soon – so get used to the dark times

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Global markets are going through a tough time, including the cryptocurrency market. But judging by the speeches from the Peanut Gallery, it seems some observers didn’t get the memo.

“Feel we’re relatively safe halfway through,” Twitter’s “CryptoKaleo” – also known simply as “Kaleo” – wrote in a Sept. 12 tweet to his 535,000 followers, referencing the U.S. midterm elections in November. The prediction was accompanied by a chart indicating his belief that the price of Bitcoin (BTC) would reach $34,000 – a 50% gain from its level of around $20,000 last week – before the end of the month. year.

“Of course we can bleed lower,” Pentoshi, another pseudonymous Twitter mega-influencer wrote in a Sept. 9 missive to its 611,000 subscribers. “But the market at this value is much more attractive than it has been for over a year. […] Caught some $BTC yesterday / no alts but will nibble.

These assessments come from “respectable” observers – those who have periodically been correct in the past. A gentleman in my inbox today – a Charlie Shrem looking to sell his “investment calendar” – assured readers that a “big” crypto launch “could start tomorrow.” Look further afield and it’s not hard to find even more bullish predictions, like the prediction that Bitcoin is on the verge of a 400% surge that will take it to an all time high price of $80,000 and a market cap of $1.5 trillion, which is $500 billion more than the value of everything money on Earth.

It’s good to see optimism creeping in, even if it’s mostly among influencers looking for engagement and paying customers. Unfortunately, the macroeconomic headwinds indicate that the reality is a little darker – perhaps a lot darker.

FedEx last week highlighted the possibility that economic conditions could deteriorate when it announced that it had fallen $500 million from its first-quarter revenue target. “These numbers – they don’t bode very well,” CEO Raj Subramaniam noted wryly in an interview with CNBC. His comments, which included a prediction that the numbers represented the start of a global recession, caused his company’s share price to slump 21% over the weekend that dragged down the market as a whole.

Related: What Will Drive Crypto’s Likely 2024 Bull Run?

In response to the economic slump, FedEx said it plans to take action, including closing 90 locations by the end of the year. The good news: Americans are so in debt that they’re unlikely to have planned to visit any of these places anyway. Consumer debt hit $16.15 trillion in the second quarter of 2022 — a new all-time high — the Federal Reserve Bank of New York noted in an August report. The number comes to just over $48,000 for every man, woman and child in the United States, or $330 million in all.

Total consumer debt held by Americans. Source: FRBNY/Equifax Consumer Credit Experts Group

With a national median income of $31,000, this equates to an average debt-to-income ratio of 154%. If you want to factor in just over $30 trillion in debt held by the federal government, you can add another $93,000 per person, for a total of $141,000 and a debt-to-income ratio of 454%. (The numbers obviously get worse if you take into account that only 133 million Americans had full-time jobs in August.)

While policymakers may be indifferent to public debt, they are more concerned about consumer debt. “I say to the American people that we are going to get inflation under control,” President Joe Biden said in a CBS interview on Sunday, prompting observers to wonder if he was trying to outpace the Federal Reserve’s announcement this week of inflation. a potentially huge upside. , a 100 basis point increase in the federal interest rate. Such a move would likely send the markets into a tailspin from which they would not recover for some time.

Ironically, even this decision may not be enough to bring inflation under control in the short term. Given the rapid rise in debt, it’s perhaps unsurprising that inflation – up just over 8% in August year-on-year – showed little signs of slowing down. Americans may not have a lot of money left, but overall that reality hasn’t dampened demand. If the New York Fed report was any indicator, the liquidity supporting this demand comes from credit. The bank noted that credit card debt in the second quarter saw the largest year-over-year percentage increase in more than 20 years.

Related: What will the cryptocurrency market look like in 2027? Here are 5 predictions

This is where the problem lies. No matter how quickly federal authorities move to discourage debt, it’s unclear when asset prices will rise. High levels of debt – which already exist – means less money to buy things. Raising the cost of servicing debt, as the Federal Reserve is trying to do, means less money to buy things. Forcing Americans into a state of economic ruin in order to cut costs means less money to buy things. Failing to control inflation and letting the cost of basic goods and services continue to rise – exacerbated, of course, by an energy crisis in Europe over which financial managers have little control – means less money to buy whatever whatever else.

Perhaps that perspective is the same one Elon Musk arrived at when he said in June that he had a “super bad feeling” about the economy. Other observers have posted even gloomier takes, including the famous debt downpour rich dad, poor dad author Robert Kiyosaki. “Biggest bubble bust is coming,” Kiyosaki wrote on Twitter in April. “Baby boomer pensions will be stolen. End $10 trillion in counterfeit currency spending. The government, Wall Street and the Fed are thieves. Hyper-inflation Depression here. Buy Gold, Silver, Bitcoin before the coyote wakes up.

Admittedly, Kiyosaki’s assessment is partially at odds with the results pessimists might expect. The economic calamity is expected to drive down asset prices across the board, including gold, silver, and bitcoin prices. A more optimistic forecaster might hope Americans will learn from their mistakes, take the next year to pay off their debts, and start spending big again in 2024 — all while avoiding a hyperinflationary depression.

Either way, one thing seems relatively certain: neither crypto nor any other asset class is on the verge of a record surge. If you want to prosper investing in the coming year, you better start learning how to buy short options from less market-savvy optimists.

Rudy Takala is the Opinion Editor at Cointelegraph. He previously worked as an editor or reporter at newsrooms such as Fox News, The Hill and the Washington Examiner. He holds a master’s degree in political communication from the American University in Washington, DC.

This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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