Hello, everyone and welcome back to kryptos news. So, as i mentioned, i was spending the week really trying to understand the macroeconomic environment that we're in, and it was uh an interesting week to decide to take that as a focus, because there's.
So much that's, changing on the macro based on what the fed is doing and you can't afford really to just be myopic when it comes to cryptocurrency and assume that it is still completely uncorrelated and that it is going To save you in any kind of environment here, based on what's going on, especially since we have ushered in the financial institutions, uh no longer are we as uncorrelated as we once were, knowing at least at least for the price, that is, at Least, for the price, the reason being that we have had many banks and funds and firms and everything else buying up bitcoin and cryptocurrencies, especially on fears of inflation happening, which make absolute sense.
Since there is especially with bitcoin, you limit only 21 million bitcoin and you only need the smallest understanding of economics to understand, supply and demand. So obviously, bitcoin and inflation inflationary environment seems like it would be at face value really really good, except you have to realize that these financial firms, don't just hold one thing: it's not like they go all in.
Maybe some of us do, but they don't, go all in on crypto or gold, or stocks or bonds, which is the important matter here. They kind of diversify across assets and they try to seek yield. They try to seek where they're, going to be making the most money.
When you look at things like stocks or even cryptocurrencies, those are considered quite risky, especially when you look at the volatility that bitcoin has huge swings. 80, 90 percent to the downside, with crypto currencies in a bear market, a lot of risk there.
When you look at stocks, they are also quite risky if interest rates begin to go up for bonds, because why would you hold something that has a lot of risk when, instead, you could hold something that is considered very safe guarantees, an income, some sort of yield? So that's, why these firms in an environment where interest rates are going up, would probably prefer to hold bonds, something that doesn't, have as much risk and maybe dump the riskier things.
So today the fed came out and basically said they realize that inflation is there and they're going to uh. They're, basically going to allow it to happen for a while um and their tools are going to be in place.
But basically they acknowledge inflation is happening for the first time, so this is kind of a sign that we might see from them some sort of new, tooling or new phrasing. That would allow them to allow interest rates to creep higher.
The issue with interest rates again creeping higher is because financial firms have to sell risk. They could sell stocks in order to buy bonds instead to get that nice guaranteed yield if inflation is very hot and it's not as hot as the yield that they're getting and it's higher than the Yield that you might get from a bond well, that would be an environment where you would want to hold crypto, because you're, not going to be making uh even enough to beat that inflation.
So i think, in that kind of environment, which might be a little farther out, we could see crypto really boom during inflation, but at this time, as we see inflation creep higher in the fed, acknowledging in the short term short medium term, what you could see is That people expect the federal reserve to raise interest rates or do something else.
Some other funny business, like i've, been looking more into operation twists and trying to understand that selling long-term bonds. When you sell interest rate interest rate, yield goes up and when you buy they go down, so basically they would be selling the long-term end to buy up the short term and uh rather the reverse, my bad.
They would sell, they would buy, they would buy the long term, they would basically invert. The yield curve is what i'm, trying to say here and that's, something that they have experimented with in the past back in the 40s and again back in the 2000s.
I believe it was so we might see some sort of yield curve control that & # 39. S being talked about a lot right now to try to manipulate things, but at this point they have to create fear in the market to allow the market to embrace some sort of resolution from them in the form of either higher interest rates or something else.
So right now it's caused stock markets. These call these comments today from jerome powell fed chair currently to to dip, and in crypto we're, seeing a little bit of that, which it shouldn't be too much of a surprise, based on what i i just told you Before so, what i'm trying to say is that there is some risk right now in crypto that you need to be aware of uh, at least in the short term.
I think that it's. True uh greg mannarino talked about this as well. If you watch his podcast that they would probably allow fear to really creep into these markets problem and solution, right, uh problem of reaction solution is what he calls it.
So we got a small reaction today, a little bit bigger in crypto, again very volatile, um and uh, a small one in the stock market. They might allow that to happen for a while before they uh basically say that they will allow inflation to run hotter for a lot longer.
They don't plan to do anything and confirm that to the market in a bigger way, and that would, i would think, be very beneficial for crypto. But we really are waiting to see what happens here and at this time you need to at least be aware of that potential.
I think, ultimately, in the next uh year or two that we'll see this uh potentially leading crypto much higher in the short term. If you're a trader, you need to be aware of those risks that currently exist on the more macro level of things.
So if you uh do want to do a little bit more research into all of this, i just wanted to give you a heads up. Some of the things that i've, been looking at today, so again, greg manorino check out his his latest video check out george gammon.
He is a gammon yeah, gammon g-a-m-m-o-n. He goes into some of the longer tail risks of what the fed is facing here, whether by keeping interest rates low or going negative or raising them, and what that could do for mortgages.
I think real estate right now is one of the scariest places to be in from everything that i'm looking at um yeah, and if you want to reinforce that a little bit that definitely check out and understand this a little bit better.
They can be a little bit of a mind twist with the way this i think very, very intelligent person writes but arthur hayes. I guess you could say previously the head of bitmex and i remember, reading a paper and that's, the biggest exchange for these margin.
Traders really still, i would say it's quite pivotal, not as much as it used to be to this entire crypto market, but bitmex created by arthur, hayes and his other team. Basically, they got served from the united states and one of them already got arrested.
The other three basically are at large. One arthur hayes is supposedly going to be announcing in hawaii that he's, going to give himself up in april. According to some court papers, um - and there's, another one in new york that he has to basically get over to new york because he's based in the uk and he's.
Dealing with some paperwork and issues with foreign affairs and immigrate immigration to basically turn himself over a little bit later than april, and then the last one basically said. No, i'm, not going to turn myself in no word from him, but anyway, arthur hayes basically continues to look at the market, talk to really smart people and put out blog posts.
I just retweeted his latest one where he goes into where you want to be in this environment right now. If you want to hedge yourself - and he basically comes down to well, i don't want to. I don't want to ruin it for you.
I do want you to read it gloss over it and if you really just want to skip to the end, you'll, see where he recommends being right now, but he looks at gold. He looks at real estate. He looks at bonds.
He looks at uh stocks. Of course he looks at crypto so check that piece out by arthur hayes. I'm, really looking forward to his next piece on central bank, digital currencies and once you get through all of these things that i've talked about it's, not going to be immediate.
I don't. Think you're, going to get all this information from me in an 8-minute video. It's, going to take a little bit of a research, but you really should be taking the time to do that. For yourself, but uh once you get through all that, i would really appreciate if you head over to the poll i just put up on twitter, and i want to know what you think the fed is going to be doing here.
So we can all predict my predictions are going to. Let fear happen for a little bit before they proffer some solution with that will taper interest rates and keep them where they're at right now, and we'll, bring new floods of money into this market and keep the champagne flowing At least a little bit longer, but they ultimately do not want to see inflation is what i'm thinking creep too high because in the longer run, because it means that we could see revolution.
I think arthur hayes talks about that really. Once we see inflation gets too hot there's, always war or some sort of revolution. That does happen as people are, are starving. They need to eat and all of that, but at the same time as they raise those rates, it makes it more affordable for people to get housing who haven't been able to afford it, but it's.
The only way to really sustain some sort of economy, we're, really stuck here in a strange place when we're at zero percent interest rates and really have nowhere to go but down, which means that market managers that, as gammon Talks about market uh, the funds money, uh, the money, funds, money markets - that's, what they're, called they basically wouldn't want to have uh they wouldn't want to have negatively yielding money right.
They wouldn't want to be there parked in negative interest rates. Since you'd, lose people would lose money having money in money markets uh in a negative interest rate world, where you'd, be charged for keeping money with the bank.
Why not seek something that actually can yield a better return, so that would that would be a very risky scenario for the repo market. The rival market is having all sorts of issues uh. Today it went negative uh.
These markets are just strangely distorted, and i do wonder how all this is finally gonna finish at the end and whether a central bank, digital currency is the solution that they're, hoping for uh, basically an account at the fed that we would All have that would give us some sort of digital dollar that might allow them to finally get this worked out.
I think that's, really what they're researching here that they've, been talking about anyway, just some thoughts out. There hope you enjoy the video um yeah don't get too much into the weeds encrypt. I think you do also need to focus on the macro level here at least a little bit, so i hope this was informative.
If you liked the video hit that, like button subscribe and i'll subscribe and i'll continue to give you updates, as i learn just trying to educate myself and pass that forward as much as i learn from you guys.
Take care, much love and stay cryptic from all of us. Oh here here's winston, he loves all of you, as does wallace, but he's, ready for some mcdonald's piece.