At a first glance, these scenarios might not seem interconnected – BTC soaring to $100,000 – alongside Plaza Accord .
Alright, let's be honest – BTC hitting $100,000 hasn't actually occurred – yet!
Cryptocurrencies are facing immense selling stress, along with a range of other assets. Earlier this year, cryptos were slammed by catastrophic macro liquidity. A word of caution – avoid engaging in fundamental investing within medium to short-term periods – it’s a path leading to disappointment. pointed out The foundational case for cryptocurrencies remains robust. So, what's happening?
We are nearing the climax of an enormous credit generation episode. The term 'cycle' doesn't fit as it suggests a return to the initial phase. Instead, this event arrives at a singular conclusion. But understanding the full dissolution of fiat currencies extends beyond mere calculations.
There’s a deeply human element to all of this…
The ebb and flow of global liquidity heavily influence crypto valuations. We find ourselves in a singular era within central banking history. Although the 1980s pose a flawed comparison to today’s fiscal climate, significant similarities do exist.
Central Banks Are Calling The Shots
For those still healing financial wounds from the preceding crypto debacle – stay alert.
Central banks are cornered. The undertaking they face defies practicality. Consider the US, where government debt climbs by approximately $1 trillion annually, with interest payments eating away at existing obligations.
For those unaccustomed to identifying futile scenarios, the aforementioned example provides a reliable rehearsal. $1 trillion every 100 days. That is over $3 trillion Governmental expenditures propel debt to record highs. Prominent contributors to US governmental expenses are defense and public assistance programs (like welfare and social security), so drastic cuts are improbable.
Indeed, it’s worth noting that roughly 25% of the US population is either directly or indirectly employed by the government – making imminent budget reductions unlikely.
Thus, it becomes apparent that reducing the cost of managing government debt could be achieved through slashing rates, acquiring debt below market value, and devaluing the USD exchange rate. Japan is already treading this path, serving as a stark (albeit grim) precedent for the US and EU!
In the 1980s, Japan occupied a position remarkably similar to the current US stance. The economy was booming (thanks to tech stocks and real estate bubbles) as governmental spending soared. Japanese public debt exceeded GDP, signifying that this credit generation phase might intensify soon.
Once again, the fundamental landscape for cryptos appears more promising than ever – keep connected with us!
Bro When is Bitcoin Going Up Again?
Here’s why the crypto horizon looks exceptionally bright. Post the late 1980s bubble burst, the Japanese central bank waged war against deflation by buying government bonds to suppress interest rates, depreciating the yen to enhance exports. The FED seeks to broaden these strategies but requires a global economic panic to succeed. GDP in around 1996 – and never looked back.
In the USA, government debt overtook GDP in 2019 Achieving global synchronized market interventions is indispensable for the FED to maintain the system for another 5 years. Yes, the severity of the situation is that dire. So, don’t anticipate a significant crypto surge until major FED action alongside other key central banks occurs. A mere 50bp cut won't suffice now.
Remember, cryptocurrencies demand liquidity to scale upwards. When dominant banks devalue the USD in comparison to global currency counterparts, liquidity will surge like a tidal wave. We haven’t reached that juncture yet. We’re amid the monetary party’s crisis phase – when the atmosphere takes a somber turn.
Social unrest spreading worldwide hasn't gone unnoticed.
Violent disturbances persist in regions like England and Northern Ireland, as reported by BBC News.
Cryptos Go Lower From Here
Like centrally managed economies, the Western alliance is buckling under pressure. Close to 40 years have elapsed since Greenspan and crew embarked on affordable-money-centric economic strategies, and the system is on the edge of disintegration.
Cryptos were merely a twinkle in the eye of enigmatic developers when Greenspan assumed office, yet today, they hinge on FED’s low-cost money for value retention. This perspective on crypto value is shared by many. The mental trap of fiat currency remains strong.
Returning to the Plaza Accord, money in the 1980s faced dilemmas nearly as severe as today.
Resembling the modern FED, Volcker initiated rate hikes to curb inflation. This maneuver overvalued the USD and prompted a mandated devaluation. The 1985 Plaza Accord addressed this.
By 1987, the surging easy money inflow propelled global equities, driving stock prices into the sky, eventually culminating in a crash.
The Big Move
Today, the FED requires a globally coordinated move to infuse markets with liquidity and devalue the USD relative to other reserve currencies. This might not involve another fancy gathering at the Plaza Hotel with bureaucrats exchanging pleasantries. Before Greenspan The chance for the FED to reduce USD value might mirror the Suez Crisis – potential ultimatums directed at the US over its aggressive military endeavours (there are many ongoing).
One truth stands firm: the global financial system teeters on the edge of a collapse. Central banks require political leverage to pave a new pathway for fiat money. Expect an amplified role for China and an uptick in CBDC deployments in future.
China serves as the test case – and soon, that framework will become widespread.
Sure, you may possess all the gold imaginable, but don’t dare demand any semblance of human rights – which implies you don’t hold actual ownership of that gold.
Just like deducing the obvious predicament of the inebriate sleeping outside the liquor shop, it’s evident central bankers face existential turmoil. You either stop consuming, or it will bring about your downfall (debt-fueled money is the bottle). US military assets near Iran at the moment BTW).
We've reached a pivotal moment in the blooming bull market for digital currencies.
With declining prices and extraordinary fundamentals, the present hurdles present a magnificent purchase opportunity. We’re investing for long-haul gains as crypto traders panic and relinquish tokens at exceptional prices! used in the West The overarching theme is more profound. Our societal framework depends on antiquated concepts. While people desire centralized control, they overlook the immense global risks such power centralization invites.
The Party Just Started
Humanity is evolving. Decentralization marks part of this shift. Bitcoin exemplifies the potential of decentralized systems. Although we doubt Bitcoin will architect a new era of human advancement, it effectively serves as a proof-of-concept.
Nicholas Say, originating from Ann Arbor, Michigan, embarked on extensive travel, resided in Uruguay for several years, and now calls the Far East home. His writings are widely accessible online, placing special focus on realistic advancement and the future trajectory of human technology.
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