The market isn’t surging anytime soon — so get used to dark times

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Glob­al mar­kets are going through a tough peri­od — includ­ing the cryp­tocur­ren­cy mar­ket. But judg­ing by talk from the peanut gallery, it seems like some observers haven’t received the memo.

“Feel like we’re rel­a­tive­ly safe through mid-terms,” Twit­ter’s “Cryp­toKa­leo” — also known sim­ply as “Kaleo” — wrote in a Sept. 12 tweet to his 535,000 fol­low­ers, refer­ring to the Unit­ed State’s Novem­ber mid-term elec­tions. The pre­dic­tion was accom­pa­nied by a chart indi­cat­ing his belief that Bit­coin’s (BTC) price would surge to $34,000 — a 50% gain from its rough­ly $20,000 lev­el as of last week — before the end of the year.

“Of course we can bleed low­er,” fel­low pseu­do­ny­mous Twit­ter mega-influ­encer Pen­toshi wrote in a Sept. 9 mis­sive to his 611,000 fol­low­ers. “But the mar­ket at this val­ue is far more attrac­tive than it’s been in over a year. […] I grabbed a lit­tle $BTC yes­ter­day / no alts but will be nibbling.”

Those assess­ments come from the “respectable” observers — those who have peri­od­i­cal­ly been cor­rect in the past. One gen­tle­man in my inbox today — a Char­lie Shrem look­ing to sell his “invest­ing cal­en­dar” — assured read­ers that a “major cryp­to ‘run-up’ could begin tomor­row.” Look fur­ther and it isn’t hard to find even more bull­ish prog­nos­ti­ca­tions, like the pre­dic­tion that Bit­coin is on the cusp of a 400% surge that will bring it to an all-time high price of $80,000 and mar­ket cap­i­tal­iza­tion of $1.5 tril­lion — $500 bil­lion more than the val­ue of all the sil­ver on Earth.

It’s good to see the opti­mism run­ning ram­pant, even if it is most­ly among influ­encers look­ing for engage­ment and pay­ing cus­tomers. Unfor­tu­nate­ly, macro­eco­nom­ic head­winds indi­cate the real­i­ty is a lit­tle dark­er — per­haps a lot darker. 

FedEx last week under­scored the pos­si­bil­i­ty that eco­nom­ic con­di­tions might wors­en with its announce­ment that it had fall­en $500 mil­lion short of its first-quar­ter rev­enue tar­get. “These num­bers — they don’t por­tend very well,” CEO Raj Sub­ra­ma­ni­am wry­ly not­ed in an inter­view with CNBC. His com­ments, which includ­ed a pre­dic­tion that the num­bers rep­re­sent­ed the begin­ning of a glob­al reces­sion, prompt­ed a 21% end-of-week crash in his com­pa­ny’s stock price that took the wider mar­ket along for the ride.

Relat­ed: What will dri­ve crypto’s like­ly 2024 bull run?

In response to the eco­nom­ic dol­drums, FedEx said it was plan­ning to take mea­sures includ­ing the clo­sure of 90 loca­tions by the end of the year. The good news: Amer­i­cans are so sad­dled with debt that it’s unlike­ly they were plan­ning to vis­it any of those loca­tions any­way. Con­sumer debt hit $16.15 tril­lion dur­ing the sec­ond quar­ter of 2022 — a new record — the Fed­er­al Reserve Bank of New York not­ed in an August report. The num­ber amounts to a lit­tle more than $48,000 for every man, woman and child in the Unit­ed States — 330 mil­lion in all.

Total con­sumer debt held by Amer­i­cans. Source: FRBNY Con­sumer Cred­it Panel/Equifax

With a nation­al medi­an income of $31,000, that equates to an aver­age debt-to-income ratio of 154%. If you want to fac­tor in a lit­tle more than $30 tril­lion in debt held by the fed­er­al gov­ern­ment, you can add anoth­er $93,000 per per­son — for a total of $141,000 and a debt-to-income ratio of 454%. (The num­bers obvi­ous­ly become worse if you account for the fact that just 133 mil­lion Amer­i­cans enjoyed full-time employ­ment as of August.)

While pol­i­cy­mak­ers might be lack­adaisi­cal about gov­ern­ment debt, they are more con­cerned about con­sumer debt. “I’m telling the Amer­i­can peo­ple that we’re going to get con­trol of infla­tion,” Pres­i­dent Joe Biden said in a CBS inter­view on Sun­day, prompt­ing observers to won­der whether he was attempt­ing to pre­empt this week’s Fed­er­al Reserve announce­ment of a poten­tial­ly enor­mous, 100 basis point rate hike in the fed­er­al inter­est rate. Such a move would like­ly send mar­kets into a tail­spin from which they would not recov­er for some time.

Iron­i­cal­ly, even that move might not be enough to tame infla­tion in the near term. Con­sid­er­ing the rapid rise in debt, per­haps it’s no sur­prise that infla­tion — up a lit­tle more than 8% in August year-over-year — has shown few signs of abat­ing. Amer­i­cans may not have much mon­ey left, but — by and large — that real­i­ty hasn’t tamped down demand. If the New York Fed’s report was any indi­ca­tor, the cash back­ing that demand is com­ing from cred­it. The bank not­ed that cred­it card debt in the sec­ond quar­ter expe­ri­enced the largest year-over-year per­cent­age increase in more than 20 years.

Relat­ed: What will cryp­tocur­ren­cy mar­ket look like in 2027? Here are 5 predictions

There­in lies the rub. No mat­ter how quick­ly the feds move to dis­in­cen­tivize debt, it isn’t clear when asset prices will rise. High debt lev­els — which already exist — mean less mon­ey for buy­ing things. Increas­ing the cost of debt ser­vice, as the Fed­er­al Reserve is attempt­ing to do, means less mon­ey for buy­ing things. Forc­ing Amer­i­cans into a state of eco­nom­ic ruina­tion in order to bring costs down means less mon­ey for buy­ing things. Fail­ing to con­trol infla­tion and allow­ing the cost of basic goods and ser­vices to con­tin­ue ris­ing — exac­er­bat­ed, of course, by an ener­gy cri­sis in Europe over which finan­cial man­agers have lit­tle con­trol — means less mon­ey for buy­ing any­thing else.

Maybe this out­look is the same as the one Elon Musk arrived at when he said in June that he had a “super bad feel­ing” about the econ­o­my. Oth­er observers have issued even dark­er takes, includ­ing the famous­ly debt-averse Rich Dad, Poor Dad author Robert Kiyosa­ki. “Biggest Bub­ble Bust com­ing,” Kiyosa­ki wrote on Twit­ter in April. “Baby Boomer’s retire­ments to be stolen. $10 tril­lion in fake mon­ey spend­ing end­ing. Gov­ern­ment, Wall Street & Fed are thieves. Hyper-infla­tion Depres­sion here. Buy gold, sil­ver, Bit­coin before the coy­ote wakes up.”

Admit­ted­ly, Kiyosaki’s assess­ment is par­tial­ly at odds with the out­comes that pes­simists might expect. Eco­nom­ic calami­ty should result in declin­ing asset prices across the board — includ­ing prices for gold, sil­ver and Bit­coin. A more opti­mistic fore­cast­er might hope that Amer­i­cans will learn from their mis­takes, take the next year to pay their debts, and resume spend­ing big in 2024 — while avoid­ing a hyper-infla­tion­ary depression.

In either sce­nario, one thing seems rel­a­tive­ly cer­tain: Nei­ther cryp­to nor any oth­er asset class is on the brink of a record-break­ing surge. If you want to pros­per through invest­ing in the year ahead, you’d bet­ter start learn­ing how to buy short options from less mar­ket-savvy optimists.

Rudy Takala is the opin­ion edi­tor at Coin­tele­graph. He for­mer­ly worked as an edi­tor or reporter in news­rooms that include Fox News, The Hill and the Wash­ing­ton Exam­in­er. He holds a master’s degree in polit­i­cal com­mu­ni­ca­tion from Amer­i­can Uni­ver­si­ty in Wash­ing­ton, DC.

This arti­cle is for gen­er­al infor­ma­tion pur­pos­es and is not intend­ed to be and should not be tak­en as legal or invest­ment advice. The views, thoughts, and opin­ions expressed here are the author’s alone and do not nec­es­sar­i­ly reflect or rep­re­sent the views and opin­ions of Cointelegraph.



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