If you read my previous post about sanctions you'll realize that if my predictions are correct we're moving into a risk-off environment, so what does that mean for Bitcoin and crypto?
As commodities rally, and people realize well I can hold dogecoin and eat dog food or I can eat a real meal, they're going to sell their most risky assets.
In the spectrum of risk, I could say options contracts, spacs and cryptocurrency is probably as far out the risk curve as you can go. Yes, there are some with more qualities than outright scams, which are also part of the mix, but for simplicities sake let's group them all as risk trades.
That means all this shit is in the firing line first as commodities run-up in price. Sure if you have enough cash to hold your positions, you may not dump, but is that wise?
If there aren't going to be new participants looking for risk in the future, you're stuck holding the bag my friend, and believe me, many of you will. You might think you're smart with your paper gains, but man those paper losses will cut into your ego just as deep as these paper gains feed your ego right now.
Low-interest rates are the cause of crypto
Despite what your local interest rate is, guess what no one gives a fuck? Your currency doesn't set the world's interest rate or the official risk-off rate. That is for the dollar to decide, I don't make up the rules, I just review them for what they are so take it with how much salt you prefer.
We've been in a low-interest-rate environment for 40 years now, since the peak of 1981, where a US bond returned a 15% return, to help curb inflation, It's been trending downward ever since.
When your risk-free trade, is often a larger part of your portfolio, which is the case for Europeans who are far bigger bondholders than the US, you need to go chase yield. That's why the US does better than Europe, they risk on and they're not fighting the fed, everyone is at the equities feeding frenzy trying to make a buck.
So what happens if that trend reverses? I mentioned in my previous post, I have a funny feeling should inflation run away in Western Europe, that the Germans are going to try to defend the Euro.
If you have a look at European Bonds its a fucking joke, they're all trading negative or close to negative with the exception of Poland and Romania, who may be giving you a 5%+ but that's only compensation for the risk you take on with their shitcoin of a currency if we factor that in over a 10 year period that you'd hold the bond, its a negative return too.
So there is fuckall money to be made in European bonds right now, and the European stock market, isn't really a playground with much volatility, hence these Euro bros jumping into crypto.
If interest rates rise, crypto dies
For every 100 basis points the interest rates increase, you'll see large capital flows out of crypto, these people are looking for returns in fiat, if fiat is giving returns why bother with all the risk of crypto?
As for Bitcoin, the stock to flow and automaticity of its ecosystem makes it an attractive allocation and it can take a short-term hit but will be along for the ride of that there is very little doubt.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, "I am a Jessie."
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