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What will happen to Bitcoin and Ethereum, if traditional markets break down?

numerous economic health indicators indicate that soon the American and world economy will be a difficult recession. What can this mean for crypto -investors?

Michael J. Berry, a financial wizard, who was portrayed in the film "Big Short", is known for predicting crises. For example, its investment fund earned billions on the housing of 2008, and in the second quarter of 2022 Berry eliminated almost the entire portfolio. Given that no one seems to know whether traditional markets will bounce before entering further recession, perhaps now is the time to consider the possibility of investing in cryptocurrencies. Below are several examples of how experienced investors sometimes miss incredible rally. In May 2017, Berry said that people should expect a "global financial collapse" and the Third World War. Instead, the S&P 500 index increased by 20% over the next 9 months. A few years later, the index reached its peak in December 2021 at a level, which is more than 100% higher than the price proposed by Berry. In December 2020, Berry said that the price of Tesla shares was "ridiculous" as a justification for opening a short position. Within 35 days after this statement, a rally occurred by 47%, and after 10 months Tesla shares reached a peak, having received a total increase of 105% of the allegedly “ridiculous” price of Tesla. Indicators indicate a large -scale recession, but when exactly, remains unknown Traiders should not discard the fact that the US dollar index has grown greatly in relation to other main world currencies and has reached the highest level over the past 20 years. This suggests that investors are desperately looking for refuge in cash, leaving stock markets, foreign currencies and corporate debt. Moreover, on September 22, the gap between the 2-year and 10-year bonds of the US Treasury increased to a record high-level -0.57%. Usually, when the yield of short -term government bonds is higher than the long -term - inverted curve of profitability - this is interpreted as an increase in the signs of a recession. The fact that on September 22 the US Federal Reserve announced a record -high level of 2.36 trillion dollars under one -day reversal repo agreements even more strengthened. Within the framework of the “reverse repo” market participants provide the Fed’s funds in exchange for US Treasury bonds and securities secured by agencies. Excess funds on investor balance sheet indicates a lack of confidence in the credit risk of counterparties, which is a "bear" indicator. After the three most important macroeconomic indicators have reached levels that have not been observed for more than two decades, two important issues remain. Firstly, what is Bitcoin (BTC) and ether (ETH) to traditional markets? What is even more important what effect should be expected by investors if the S&P 500 falls by 20%, and the housing market collapses? Regardless of whether a person pays his bills with the help of cryptocurrencies, energy prices, food and medical services are largely dependent on the US dollar. Prices for raw materials in international transactions, including imports, exports and actual trade, are mainly set in US dollars. Therefore, even if someone pays for his expenses with the help of bitcoin, there is a chance that somewhere along the way this cost will be converted into fiat money. The cost of borrowing US dollars affects the economy of many countries The main conclusion from the lack of effective circular trade exclusively using cryptocurrencies is that the life of each person depends on the strength of the US dollar and the cost of borrowing. If only a person does not live in a cave, isolated in a self-sufficient country or on some communist island, when investors save cash, and interest rates grow rapidly, this affects any market. As for the possible collapse of the housing market or the next 20 percent collapse of stock markets, it is impossible to predict its influence on bitcoin and ether. On the one hand, there is pressure from the holders who seek to reduce their risks and provide monetary positions in case of a longer crypto winter. On the other hand, an influx of investors who seek non -confiscal assets or seek protection against inflation is possible. That is why the story of Michael J. Berry becomes relevant right now, when every Pandit and a market analyst declares a quick collapse of the market or a potential collapse of housing prices. Bitcoin and ether were first encountered with the inevitable global recession, and judging by March 2020, when a panic sale caused by the Covid-19 crisis begins, those who stood for the long-term perspective were rewarded.

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9/27/2022