The market won’t grow anytime soon, so get used to the dark times

Global markets are having a hard time, including the cryptocurrency market. But judging from the peanut gallery speeches, it seems some observers didn’t get the memo.

“Feeling like we’re relatively safe in the medium term,” Twitter’s “CryptoKaleo” – also known simply as “Kaleo” – he wrote in a September 12 tweet to his 535,000 followers, referring to November’s mid-term elections in the United States. The forecast was accompanied by a chart indicating his belief that the price of Bitcoin (BTC) would rise to $ 34,000 – a 50% gain from its level of around $ 20,000 last week – before the end of the year.

“Of course we can bleed lower,” fellow pseudonymous Twitter mega-influencer Pentoshi he wrote in a September 9 letter to his 611,000 followers. “But the market at this value is much more attractive than it has been in over a year. […] Yesterday I took some $ BTC / no alt but I’m going to gnaw it. ”

Such assessments come from “respectable” observers, those who have periodically been right in the past. A gentleman in my inbox today – a Charlie Shrem trying to sell his “investment calendar” – assured readers that a “big cryptocurrency rally could begin tomorrow.” Look further and it is not difficult to find even more bullish predictions, such as the prediction that Bitcoin is on the verge of a 400% surge that will lead it to an all-time high price of $ 80,000 and a market cap of $ 1.5 trillion, $ 500 billion more than the value of everything silver on Earth.

It’s nice to see rampant optimism, even if it’s mostly among influencers seeking engagement and paying customers. Unfortunately, macroeconomic headwinds indicate that the reality is a little darker, perhaps much darker.

Last week FedEx highlighted the possibility that economic conditions could deteriorate with the announcement that it had fallen $ 500 million below its first quarter revenue target. “These numbers don’t bode very well,” CEO Raj Subramaniam wryly noted 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 stock price to drop by 21% at the weekend that led to the broader market making the rounds.

Related: What will drive the likely 2024 bull run in cryptocurrencies?

In response to the economic slump, FedEx said it intends to take steps including closing 90 locations by the end of the year. The good news: Americans are so heavily debt-ridden that it’s unlikely they were planning to visit any of those places anyway. Consumer debt reached $ 16.15 trillion during the second quarter of 2022 – a new record – the Federal Reserve Bank of New York noted in an August report. The number amounts to just over $ 48,000 for every man, woman and child in the United States, 330 million in all.

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

With a median national income of $ 31,000, this equates to an average debt-to-income ratio of 154%. If you want to account for just over $ 30 trillion in federal government debt, 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 when you take into account the fact that only 133 million Americans enjoyed full-time jobs in August.)

While policymakers may be indifferent about public debt, they are more concerned about consumer debt. “I am telling the American people that we will have inflation control,” President Joe Biden said Sunday in an interview with CBS, prompting observers to wonder if he was trying to anticipate this week’s announcement by the Federal Reserve of a huge potential, 100 basis point rate hike in federal interest rate. Such a move would likely send the markets into a downward spiral from which they would not recover for some time.

Ironically, even that move may not be enough to tame inflation in the short term. Considering the rapid increase in debt, it is perhaps unsurprising that inflation – which rose by just over 8% in August year-over-year – showed little sign of abating. Americans may not have a lot of money left over, but, in general, this reality hasn’t suppressed demand. If the New York Fed report were any indicator, the liquidity to support that demand comes from credit. The bank noted that credit card debt in the second quarter recorded 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

Here lies the problem. No matter how fast the feds move to discourage debt, it is unclear when asset prices will rise. High debt levels – which already exist – mean less money to purchase things. Raising the cost of servicing debt, as the Federal Reserve is trying to do, means less money to buy things. Forcing Americans into economic ruin to cut costs means less money to buy things. Failing to control inflation and allowing the cost of basic goods and services to 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.

Perhaps this perspective is the same one that Elon Musk came to when he said in June that he had a “super bad feeling” about the economy. Other observers have emitted even more obscure footage, including the famous debt aversion Rich dad, poor dad author Robert Kiyosaki. “Biggest bubble burst to come,” Kiyosaki tweeted in April. “Baby Boomer’s retirements to steal. $ 10 trillion dollars in finished bogus 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 partly at odds with the results pessimists might expect. The economic calamity is expected to result in asset prices falling across the board, including the prices of gold, silver, and Bitcoin. A more optimistic forecaster might hope that Americans learn from their mistakes, take the next year to pay off their debts, and resume spending big in 2024, avoiding a hyperinflationary depression.

In both scenarios, one thing seems relatively certain: neither cryptocurrencies nor other asset classes are on the verge of a record surge. If you want to thrive by investing in the year ahead, you better start learning how to buy short options from less market-savvy optimists.

Rudi Takala is Cointelegraph’s opinion editor. He previously worked as an editor or reporter in newsrooms including Fox News, The Hill and Washington Examiner. He holds a master’s degree in political communication from American University in Washington, DC.

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

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