I turn my focus once again to traditional the traditional stock market. One of the LF members remarked on the last article that the algorithm was up as much (4%) as the market was down today. Without trying to be too much of an alarmist, the stock market is making unprecedented and historical moves that we’ve only seen a dozen times in history. The crash has the same velocity of 1987, the volatility or fear index is at levels that we haven’t seen since 2008 and 2000, and bond rates haven’t plummeted like this for almost 100 years.
It’s important to be aware of the markets and how they’re behaving because money always makes the first move.
Rumors are going around about another emergency rate cut, something I talked about in the last article. This is not a good thing, this is panic. Below is a highlight from a big bank’s report to its investors.
Bonds are Unwinding:
There are likely many variables to this situation, but in general, this bond movement is panic and capital flight. Currencies are currently being so rapidly devalued around the world that people and institutions are flooding the bond markets. Bond rates and bond premiums are inversely correlated, thus the more buyers of bonds, the lower the rates move. I generally like to avoid comparisons to 1929, but bond rates simply haven’t dropped like this since then.
Volatility Index at Historical Levels:
I’ve followed the VIX for years and I understand it very well. If the markets don’t calm down in the next couple of days, the VIX will likely get above 45, which has only happened during 2008 following the Lehman and Bear Sterns collapse.
The problem with fiat currencies is that they are infinitely printable, and suffer from constant inflationary pressures. With central banks cutting rates and printing currency worldwide, the dollar has every reason to be devalued. What’s most interesting about this is that Bitcoin trades directly against the dollar (BTC/USD), and Bitcoin as of the time of writing remains above 9000.
Now if the next economic crisis has to do directly with a big collapse in the dollar, it’s possible I could be wrong about my previous statement that a stock market crash would be bad for Bitcoin. As far out as it seems, it’s possible a new world can emerge from the economic collapse that has lost faith in central banks and fiat currency. A hint at this was the market’s vicious reaction to Powell’s rate cut the other day. It sold off immediately and effectively neutered the federal government. That made me believe things are worse than they may appear.
I would happily be wrong about a crash being bad for Bitcoin.
Take care and stay safe.