In the latest bit of bizarre market action we had China launch the Petro Yuan which is potentially cataclysmic to the United States economy yet the stock market went up. It’s almost like if we were to have a dream where we took a trip to stock exchange and nothing made sense. Up was down and down was up but everyone went along with their business as if this is all normal day to day trading.
So, we had the dow jones up about 670 points today which would imply that the market is doing well, risk play still on. But no, cryptos were down! Bitcoin was below 8k. Us bonds were selling off and the yields going higher so you would think that some of this might flow into crypto futures at least but this didn’t happen. There were reports that Twitter was doing something further in banning crypto ads or something along those lines but there was talk of this last week too. The US dollar even went down, but still, the risk trades seem to be fading.
The Petro Yuan basically gives countries the option of not having to hold any US dollars whereas before they had to own US dollars in order to purchase oil. Another thing that the Petro-Yuan does is effectively undoes US sanctions (not completely). Before if you were sanctioned by the US they could freeze your bank accounts as they were denominated in dollars. Now that countries can just use Chinese yuans instead the sanctions aren’t as big of a deal. Besides the sanction ability it just creates a situation were countries can diversify themselves out of the US currency and the need to now hold dollars has significantly diminished. Not exactly something you would think would cause a rally.
Moving forward I would expect more bizarre market action to happen this spring. There has been structural problems to the economy that certainly needed addressing but what we are going to start to see happen now (in my opinion) is an acceleration of the market reversal. Expect the volatility to pick up now as the diversifying intensifies. That, and the fact that in the prior week the US had just passed a bill to spend $1.3 trillion is just going to make things worse.
Regarding crypto price action, I would still remain bearish in general. I don’t see too much downside just yet because the market hasn’t really begun its move lower but when it does expect it to drag everything down with it. However, if we start to notice a decoupling where the market is having large down moves and money is flowing into bitcoin or some of the prominent coins then we will see a decoupling start and that would change the current trend. Should be very exciting to see what the futures hold.
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