Another crypto collapse: what happened this time?
In fact, it could be compared to a horror movie, involving not only Bitcoin, which, according to Coinmarketrate.com, fell to $20,000. All other cryptocurrencies followed it, together with stocks market, as the US stock exchanges recorded an equally strong drop.
The reason for the fear was the meeting in Jackson Hole, which has already become a tradition, where the top leadership of the Fed meets with economists and journalists to discuss the current financial and economic situation. A meeting, that could only be concentrated on the level of inflation that should be expected and countermeasures to contain it. A meeting that sent markets into a panic over Powell’s alleged decision to fight price increases. What will this bring to the crypto sector?
Strong Fed action
The key concept was expressed by Jerome Powell, who recalled the need for vigorous action on the part of the central bank to restore price stability. And this, taking into account the funds available to the bank, means a further increase in rates and a tightening of the purchase of government bonds. Maneuvers that usually squeeze markets and cause them to flee.
Crypto markets are going to struggle. An uphill struggle, one that scares the markets. And it will take time.
If a few months ago the Fed’s macs insisted that this situation was temporary, now they seem to have finally realized that it will take time to return to normal life. And for this, again, according to Powell, businesses and households will pay, calling it “the costs of reducing inflation.” And this means that the interest rate is still rising.
This is what we get from the fact that Powell said that at some point the rate of increase, and therefore the increase itself, will have to be reduced. Thus, there is almost absolute confidence in the next rate hike by 75 basis points, and in the absence of good and convincing new news on inflation, the continuation in the same spirit.
Inflation, Bitcoin and Ethereum: what is the correlation?
In fact, we have already discussed this in detail before: Bitcoin and cryptocurrencies are not yet anti-inflationary assets in the full sense of the word, and continue to behave most of the time as risky assets.
And thus have a clear parallel with the shares of the main stock exchanges. In the end, it’s enough to look at yesterday’s results of NASDAQ, as well as other US stock exchanges and indices. All this is connected with the world of cryptocurrencies and Bitcoin, acting as a kind of growth index.
At the moment, this is a factual truth about which there is little to say, unless you want to live in a fantasy world, which, however, is more suitable for science fiction writers than for those who want to understand how the market is moving. We can always talk about changes that may occur in the future, as Scaramucci did, pointing to a billion-dollar wallet as a threshold that can change this trajectory. So far, this is not the case, and we will have to remain “in limbo” depending on the Fed’s decisions, which, in turn, are related to how inflation and the labor market will behave.
Full employment is no longer a priority
The Federal Reserve’s mandate is to achieve as much employment and price stability as possible. Many seem to ignore this dichotomy. And they also don’t seem to notice that when price stability gets out of control, you can turn a blind eye to maximum employment.
And, probably, this is exactly what, at least from the loud shocks, the future awaits us in the coming weeks. Weeks during which the tightening of the economy will even be desirable for the Fed’s policy.
A complete disaster? No, because in reality, markets react very quickly to expectations, not to actual data. And so, to date, they have already included in the price not the most exciting situation. Which may be a good moment to evaluate further long positions.
But, the bad news doesn’t end there. Now they concern Bitcoin ETF Spot and SEC.
The SEC does not intend to make a decision on spot Bitcoin ETFs, that is, ETFs that will hold Bitcoin, and not just copy the futures price of the same asset.
SEC postpones decision on VanEck ETF for 45 days
The Securities and Exchange Commission, which oversees markets and approves listings of financial products, used its right to delay for 45 days. The postponement concerns an application for permission to trade an ETF proposed by VanEck, in which Bitcoin will be located directly inside it, and not just copy the mechanisms of futures prices.
Predictable? Yes, it this was quite predictable.
This is an attempt that almost all major fund managers have made in the past, and always with the same result. That is, with the refusal of the SEC, which in recent weeks, in its explanatory statement, has set very precise conditions for such a security to be accepted for consideration.
As is well known to those who read our articles, the SEC would have to concentrate Bitcoin trading on several markets and intermediaries as a precondition in order to be able to easily exercise control over price manipulation. An absurd condition, a completely impossible, and due to this reason it is not required, for example, for securities reproducing Bitcoin futures that are actually traded on the same market, but with a basic basis that accurately represents the problems mentioned above.
This could be a boost for Bitcoin, although now it has the opposite effect
For several months now, everyone has been looking at these SEC decisions, believing that they can have a significant impact on the price of BTC, that is, believing that a positive decision can serve as a flywheel for a significant price increase.
This may be true, but it is not so relevant for an asset that, even at a purely financial level, will eventually be willy-nilly marked with the SEC mark. And as long as Gensler remains in the saddle of the agency, it will be very difficult to see approval. And all this despite pressure from many circles, including at the political level.
And all this even taking into account the fact that Gary Gensler behaves like a mentally ill person, because he will have little to decide directly on cryptocurrencies, since in the United States they focus on the CFTC, and not on the agency headed by the good Gary.
But, there is also good news from the American political Olympus
Senate Candidate Bruce Fenton Stands for Bitcoin
The time for midterm elections will soon come, elections that in the United States partially renew the highest representative authorities at the federal and local levels. And one of the candidates in New Hampshire is strongly in favor of Bitcoin and cryptocurrencies. This is Bruce Fenton, who has already become something of a celebrity on Twitter in the cryptocurrency part of the world.
“Bitcoin? It should not be regulated. And people should have full access to all the currencies they prefer, without any obstacles from the federal government or local authorities,” Fenton said.
This is an opinion that is actually quite widespread among relatively popular politicians in the US, and which returns Bitcoin to the center of the election debate.
A good sign? Of course, this is a sign of a better state of American politics than European politics, where, unfortunately, there are very few politicians defending the freedom offered by BTC.
Bruce Fenton’s chances of winning are small, however, it is nice to see that there are those campaigning for Bitcoin in the upcoming US elections, which will partially renew the Congress and the Senate. Bitcoin has become a strong election theme, which was also chosen as an example by Ted Cruz, who is clearly more used to big scenes, as well as a relatively small group of opponents, all of whom are on the side of the majority led by Biden.
The US dollar melts an ice cube
But, Bruce Fenton continues his campaign based on the freedom of origin and aimed at giving as many people as possible the opportunity to choose between Bitcoin and the US dollar.
“We don’t need politicians to tell us what the currency has been like throughout the history of mankind. For thousands of years, people have chosen it for themselves, whether it’s gold, silver or Bitcoin, and the fact is that our current currency no longer works. They have endless money that they can print at their discretion without any responsibility”.
A tough position, of course, but it can be largely divided, because it is a fairly accurate description of what central banks, often only on paper, actually separated from political power, are able to do today.
And what about Europe?
Although several politicians have come into view who are definitely sympathetic to this kind of affairs, Europe and America are far from each other, both in terms of political culture and the origin of systems, and it will be very difficult for us to see such views from candidates, no matter how peripheral they may be.
“Everyone should have the freedom to choose the best currency. If I had to choose, I would choose Bitcoin. I would recommend other people to choose something else, because dollar is a melting ice cube.”
Positions are, frankly speaking, not respected in the market, while the dollar, at least relatively, is experiencing a moment of extraordinary strength. But perhaps Fenton is talking about the medium and long term. And there the battle is just beginning.