Speaker 1: Hello everyone, and welcome to the latest episode from the
Speaker 1: midweek edition of the Coin bureau podcast. Every week, I
Speaker 1: pick out two of my favorite videos from coin bureaus
Speaker 1: YouTube channel to present to you in podcast form. The
Speaker 1: audio you're about to hear is from those videos I've
Speaker 1: chosen this week, and I hope you enjoy listening. You'll
Speaker 1: no doubt be pleased to hear that ft X doesn't
Speaker 1: feature prominently in either of the sections you'll hear today.
Speaker 1: It still hangs like a black cloud over the crypto industry,
Speaker 1: but there are other things we need to focus on,
Speaker 1: such as what Jerome Powell and his crew at the
Speaker 1: Federal Reserve are thinking about the economy and why the
Speaker 1: crypto market could still go lower from here. It's been
Speaker 1: a few weeks since the folks that the Fed last
Speaker 1: hiked interest rates, and many have been speculating or praying
Speaker 1: that they may ease off on raising them any further.
Speaker 1: As always, investors have been hanging on every scrap of
Speaker 1: information to emerge from Fed HQ, and we've got a
Speaker 1: whole dollarp of it recently, when the minutes of the
Speaker 1: last FED meeting were published a couple of weeks ago,
Speaker 1: so In the first part of today's video, you'll hear
Speaker 1: our analysis of those minutes and what they could signal
Speaker 1: for the US and other economies in the coming months.
Speaker 1: There's still lots to be concerned about. Speaking of things
Speaker 1: to be concerned about, the crypto bear market we're in
Speaker 1: could still get more well bearish before things start to
Speaker 1: look up. There are a number of macro and crypto
Speaker 1: specific factors that could yet push prices lower, and they're
Speaker 1: the topic for the second part of today's episode from
Speaker 1: yet more f t X Contagion. I knew we'd touch
Speaker 1: on it at some point too. Bitcoin miners struggling to
Speaker 1: the stock market and beyond. Crypto has a minefield to
Speaker 1: walk through before things can get better, and some of
Speaker 1: those minds contain a lot of explosives. Have a listen
Speaker 1: and watch your step. Thanks for listening to today's episode,
Speaker 1: and there'll be more coming your way soon. And if
Speaker 1: you want even more content from coin Bureau, be sure
Speaker 1: to subscribe to our YouTube channel and visit us on
Speaker 1: social media too. Last week, the Federal Reserve published the Minutes,
Speaker 1: that is summary of its most recent meeting. The minutes
Speaker 1: revealed that most Fed officials want to slow the pace
Speaker 1: of interest rate hikes going forward. The news caused markets
Speaker 1: to rally on the possibility that the FED will pivot.
Speaker 1: The problem is that slowing the pace of rate hikes
Speaker 1: is not the same thing as lowering rates themselves, and
Speaker 1: the headlines don't tell the full story. That's why today
Speaker 1: I'm going to take a closer look at the Fed's
Speaker 1: most recent minutes, summarize what they say in simple terms,
Speaker 1: and tell you exactly what it could mean for the
Speaker 1: markets in the coming months. Okay, let's start with a
Speaker 1: bit of background. As most of you will know, the
Speaker 1: Federal Reserve is the central bank of the United States.
Speaker 1: What most of you may not know is that the
Speaker 1: FED itself consists of twelve regional banks that are scattered
Speaker 1: across the United States, each of which has its own president.
Speaker 1: As most of you will know, the FED is governed
Speaker 1: by seven governors, which include FED Chairman Jerome Powell. What
Speaker 1: some of you may not also know is that the
Speaker 1: central banks monetary policy is decided by the Federal Open
Speaker 1: Markets Committee, or f o m C. The f o
Speaker 1: m C consists of the feds seven governors, the president
Speaker 1: of the New York Fed, and four of the other
Speaker 1: presidents of the fed's other regional banks. The regional FED
Speaker 1: presidents who sit on the f o m C change
Speaker 1: every year, save of course, for the President of the
Speaker 1: New York Fed, who has a permanent seat. In theory,
Speaker 1: each member of the f o m C casts a
Speaker 1: vote supporting or opposing the committee's decision on whether or
Speaker 1: not to raise or lower interest rates, and the final
Speaker 1: vote determines the rate hike. In practice, however, the FED
Speaker 1: Chairman in this case, Jerome, apparently has the final say.
Speaker 1: In addition to Jerome, the f o m C currently
Speaker 1: consists of the following personnel. Fed Governor's Lele Brainard, Michael Barr,
Speaker 1: Michelle Bowman, Lisa Cook, Philip Jefferson, and Christopher Waller, New
Speaker 1: York FED President John Williams, Boston Fed President Susan Collins, St.
Speaker 1: Louis Fed President James Bullard, Kansas City President Esther George
Speaker 1: and Cleveland FED President Loretta J. Mester. I'll quickly note
Speaker 1: that Michael Barr actually wrote the law that created the
Speaker 1: position of Vice chair for supervision, which he now holds.
Speaker 1: Michael seems to be intent on using the laws he
Speaker 1: wrote in the aftermath of two thousand and eight to
Speaker 1: crack down on crypto. More about that using the link
Speaker 1: in the description. Now, all twelve f O m C
Speaker 1: officials were present at the FEDS last meeting. This is
Speaker 1: in addition to around fifty other academics and economists who
Speaker 1: work for the FED, including members of the fed's other
Speaker 1: regional banks. The f O m c's last meeting took
Speaker 1: place on the first and second of November. To clarify,
Speaker 1: the minutes of these meetings are not released until around
Speaker 1: three weeks after the meeting in question takes place. This
Speaker 1: is presumably to give the markets guidance about interest rates
Speaker 1: between FED meetings, which occur around every six weeks. Obviously,
Speaker 1: what investors look for in the FEDS minutes is evidence
Speaker 1: of the central bank's plans regarding interest rates. Every single
Speaker 1: word is scrutinized to see if the f O m
Speaker 1: C is being hawkish i e. Planning on raising interest
Speaker 1: rates or dovish i e. Planning on lowering them. As
Speaker 1: almost all of you will know, raising interest rates tends
Speaker 1: to cause markets to crash, whereas lowering them tends to
Speaker 1: cause markets to rally. Because markets are forward looking, assets
Speaker 1: tend to react immediately to the FEDS minutes even though
Speaker 1: the rate hike or rate cut hasn't actually happened yet.
Speaker 1: So with that background under your belt, let's see what
Speaker 1: the f o m C had to say. The first
Speaker 1: part of the fed's meeting was a quote ethics discussion,
Speaker 1: wherein FED Chairman Jerome Powell reminded everyone present to be
Speaker 1: on their best behavior. In other words, no sharing of
Speaker 1: insider information, no insider trading, and make sure to report
Speaker 1: all your investments. Nudge nudge, wink wink. With that bit
Speaker 1: of business done, the second part of the meeting was
Speaker 1: about rate hikes. F O m C officials discussed how
Speaker 1: they're planning to raise interest rates higher than they had
Speaker 1: planned in September, something that Jerome had told the public
Speaker 1: in the fed's subsequent press conference. We actually summarized Jerome's
Speaker 1: press conference too, that will also be in the description now.
Speaker 1: One thing that Jerome didn't tell the public during his
Speaker 1: press conference was that most f o MC officials see
Speaker 1: a fifty basis point hike as being appropriate at the
Speaker 1: fed's next meeting. For context, the FED has been aggressively
Speaker 1: raising rates at seventy five basis points a pop for
Speaker 1: the last few months. This basically confirms what Jerome denied,
Speaker 1: which is that the FED is planning on slowing the
Speaker 1: pace of rate hikes. As I mentioned in the introduction,
Speaker 1: this caused markets to rally across the board, except for
Speaker 1: crypto because it was busy getting wrecked by the ft
Speaker 1: X Alameda situation. The f o m C also mentioned
Speaker 1: the blow up in UK government bonds in September and
Speaker 1: cautioned that the early warning signs of a similar event
Speaker 1: are starting to emerge in the US, namely low liquidity.
Speaker 1: The f o m C also touched on how other
Speaker 1: currencies are collapsing against the US dollar, but didn't have
Speaker 1: much to say on the matter. What's interesting is that
Speaker 1: the f o m C reveals that the Federal Reserve
Speaker 1: and other central banks are actively losing money due to
Speaker 1: higher interest rates. Fortunately for the central banks, they don't
Speaker 1: technically need to be profitable, even though the FED is
Speaker 1: technically a private company. The more you know, now. The
Speaker 1: third part of the Fed's meeting was about the economy.
Speaker 1: The f O m C officials discussed the surprisingly positive
Speaker 1: GDP print for Q three in the United States, the
Speaker 1: continually tight labor market, and the increase in the Personal
Speaker 1: Consumption Expenditures Index or PCE, the feds favorite inflation gauge.
Speaker 1: Oddly enough, the FED went on to discuss how labor
Speaker 1: market conditions are looking for different minority groups, and seem
Speaker 1: to blame most of the economic issues we're facing on
Speaker 1: the war in Ukraine, China's zero COVID policy, and tighter
Speaker 1: financial conditions as a result of higher interest rates. The
Speaker 1: f O m C also touched on the rising inflation
Speaker 1: in other countries, caused primarily by disruptions to energy supplies.
Speaker 1: They noted that foreign central banks have raised interest rates
Speaker 1: to try and fight this inflation, but have slowed their
Speaker 1: rate hikes as they realize there's only so much demand
Speaker 1: they can destroy. The fourth part of the fed's meeting
Speaker 1: was about financial conditions. There's a lot to cover here,
Speaker 1: so i'll just give you the highlights. First, the f
Speaker 1: O m C seemingly took issue with the recovery in
Speaker 1: the stock market that started in mid October. This would
Speaker 1: make sense as it's essentially the markets challenging the Fed. Second,
Speaker 1: investors have been selling off foreign assets and deploying that
Speaker 1: dry powder into US s sts, mainly US government debt.
Speaker 1: This makes sense given that US government debt is provided
Speaker 1: increasingly higher interest rates and is also considered to be
Speaker 1: the safest asset in the eyes of institutional investors. This
Speaker 1: phenomenon of money flowing into the United States is actually
Speaker 1: part of the so called dollar milkshake theory proposed by
Speaker 1: an increasingly popular macro analyst named Brent Johnson. The t
Speaker 1: l d R is that most of the world's money
Speaker 1: will flow into the US as foreign countries and currencies collapse.
Speaker 1: You'd think that this would be incredibly bullish for the U.
Speaker 1: S Dollar and US assets, and it will be for
Speaker 1: a while. The thing is that the dollar milkshake theory
Speaker 1: ends with the US dollar and US assets collapsing. To
Speaker 1: note that this process will take many years and possibly
Speaker 1: decades to play out, assuming Brent's theory is true. Now.
Speaker 1: The third thing that caught my eye in the f
Speaker 1: O m c S Financial overview was the rapidly rising
Speaker 1: interest rates on credit card debt in the United States.
Speaker 1: This is concerning because credit card debt in the United
Speaker 1: States recently hit an all time high of over nine
Speaker 1: thirty billion dollars I reckon one trillion is just weeks away.
Speaker 1: This relates to the fourth takeaway, and that's that the
Speaker 1: housing market continues to slide on the back of rising
Speaker 1: interest rates and that banks are becoming less eager to
Speaker 1: lend to consumers. This is essentially true of auto loans
Speaker 1: and credit card related loans, which is understandable given the
Speaker 1: statistics I just mentioned regarding financial stability. Stress tests conducted
Speaker 1: in conjunction with the largest US banks suggest that they
Speaker 1: would be resilient in the event of a severe economic downturn. However,
Speaker 1: the f o m C couldn't say the same for
Speaker 1: hedge funds and other entities in the financial sector due
Speaker 1: to their high levels of leverage. This ties into the
Speaker 1: fifth part of the fed's meeting, which was about its
Speaker 1: economic outlook. If I understand correctly, the f o m
Speaker 1: C is projecting that output of the U S economy
Speaker 1: will be quote below potential until five and that unemployment
Speaker 1: will simultaneously stay above four until that time. This might
Speaker 1: have something to do with the fact that the f
Speaker 1: o m C raised its inflation projections for the coming quarters. Logically,
Speaker 1: this means that the FED will have to continue raising
Speaker 1: interest rates, or at least keep them higher for longer
Speaker 1: to fight this inflation, resulting in the aforementioned economic conditions.
Speaker 1: For what it's worth, the f O m C expects
Speaker 1: inflation to come back down to two percent as measured
Speaker 1: by the core PC in This is expected given that
Speaker 1: what the f O m C is effectively forecasting is
Speaker 1: a long recession that will last at least two years,
Speaker 1: and recessions tend to reduce inflation. As a cherry on top,
Speaker 1: the fo MC cautioned that their baseline projections are quote
Speaker 1: skewed to the down side. Put simply, they know that
Speaker 1: their economic projections are likely to get worse, not better,
Speaker 1: as more economic data comes in. This makes sense given
Speaker 1: that an energy crisis could happen over the winter. More
Speaker 1: about that in the description. Anyways, The sixth part of
Speaker 1: the Fed's meeting was again about current economic conditions. The
Speaker 1: f O m C again blames Russia's invasion of Ukraine
Speaker 1: as being a primary driver of inflation. I'll just remind
Speaker 1: you that central banks printed trillions upon trillions of dollars
Speaker 1: in response to the pandemic in early Most of the
Speaker 1: inflation related to Russia's invasion of Ukraine also has to
Speaker 1: do with sanctions that don't seem to be working. But
Speaker 1: let's not go there. Funnily enough, the f O m
Speaker 1: C says that another decline in real GDP would be
Speaker 1: helpful in bringing inflation back down. As a fun fact,
Speaker 1: Bank for America seems to have predicted the sudden g
Speaker 1: d P spike in Q three this year. The rest
Speaker 1: of its projection says that real g d P will
Speaker 1: again go negative starting next year. Take note. The f
Speaker 1: O m C also discussed the status of household balance sheets.
Speaker 1: Believe it or not, but the still record levels of
Speaker 1: savings in the U S economy thanks to all the
Speaker 1: pandemic stimulus. The catch is that most of these savings
Speaker 1: are concentrated with wealthier individuals and institutions. There's a surprise.
Speaker 1: On the lower end, individuals and institutions are starting to
Speaker 1: report financial stress. I reckon the record levels of credit
Speaker 1: card debt say it all. Even so. Jerome mentioned at
Speaker 1: the fed's most recent press conference that the higher overall
Speaker 1: savings should cushion the U. S economy from a severe recession.
Speaker 1: Makes you wonder whether it was all planned. More about
Speaker 1: that in the description. Now, after discussing the collective effects
Speaker 1: the rising interest rates of central banks are having on
Speaker 1: the global economy, the f o m C focused on
Speaker 1: the supposedly tight labor market in the United States. I
Speaker 1: say supposedly because there's lots of debate about how accurate
Speaker 1: the unemployment statistics are. Case and point tech companies have
Speaker 1: literally laid off over one hundred thousand people over the
Speaker 1: last few months and are planning to lay off hundreds
Speaker 1: of thousands more going forward. This might just be a
Speaker 1: case of media bias, but it really looks like people
Speaker 1: are starting to lose their jobs across the board. This
Speaker 1: is implied by the f O m C in the Minutes,
Speaker 1: as they note the supply of labor coming in line
Speaker 1: with the demand for labor. They also note that most
Speaker 1: of the demand for labor is coming from low skilled,
Speaker 1: low paying jobs that recently fired six figure salaried software
Speaker 1: developers probably won't be doing any time and soon. What
Speaker 1: sucks is that the people working these low skilled, low
Speaker 1: paying jobs are being squeezed the most by inflation. The
Speaker 1: element that's been hitting most people the hardest is the
Speaker 1: cost of accommodation i e. Rents. What really sucks is
Speaker 1: the f O m C projects rents will be one
Speaker 1: of the last inflation dominoes to fall now when it
Speaker 1: comes to inflation expectations, the f O m C observed
Speaker 1: that long term inflation expectations remain quote well anchored, as
Speaker 1: Jerome loves to say. However, they cautioned that if long
Speaker 1: term inflation expectations start to rise again, then it could
Speaker 1: make their fight against inflation that much fiercer. What's fascinating
Speaker 1: is that the f O m C seems to have
Speaker 1: gotten into a small argument over how long it takes
Speaker 1: for the Fed's rate hikes to affect the economy. The
Speaker 1: section of the minutes breaking down this exchange is one
Speaker 1: of the lengthiest by far, which is why I suspect
Speaker 1: there was a lot of back and forth there. For
Speaker 1: those who don't know, Jerome seems to believe that the
Speaker 1: FEDS rate hikes have a near immediate impact on the economy.
Speaker 1: His reasoning is that the economy has become so financialized
Speaker 1: that it doesn't take more than a few months for
Speaker 1: the effects of rate hikes to be felt. By contrast,
Speaker 1: the academics on the f O m C argue that
Speaker 1: it takes much longer for rate hikes to impact the economy.
Speaker 1: This is because history suggests that it takes up to
Speaker 1: eighteen months for the effects of rate hikes to be felt.
Speaker 1: Jerome seems to have pushed back by pointing out that
Speaker 1: this historical data is shaky at best. The f O
Speaker 1: m C quote generally noted that their economic projections are
Speaker 1: uncertain and they believe that inflation is more likely to
Speaker 1: increase than decrease in the short to medium term. Some
Speaker 1: members once again repeated that this is all Russia and
Speaker 1: China's fault. Good thing, Jerome knows what's up. In terms
Speaker 1: of U S. Treasuries, the f O m C one
Speaker 1: again acknowledged that markets for US government debt are lacking liquidity,
Speaker 1: but remain quote orderly. If you're wondering why liquidity is important,
Speaker 1: that's because high liquidity means that you can sell a
Speaker 1: large amount of an asset without moving its price. Now
Speaker 1: I couldn't help but notice that some members of the
Speaker 1: f O m C quote noted the risks posed by
Speaker 1: non bank financial institutions amid the rapid global tightening of
Speaker 1: monetary policy and the potential for hidden leverage in these
Speaker 1: institutions to amplify shocks. I see you, Michael Barr. The
Speaker 1: f O m C went on to agree on raising
Speaker 1: interest rates by another seventy five basis points and patted
Speaker 1: themselves on the back for raising rates so aggressively. They
Speaker 1: agreed that the labor market is tight, at least on paper,
Speaker 1: and that means they can continue raising interest rates while
Speaker 1: claiming the economy is fine. After repeating the mantra that
Speaker 1: the Fed is committed to bringing inflation back down to
Speaker 1: its two pc target, the f O m C reiterated
Speaker 1: that they want to slow the pace of rate hikes.
Speaker 1: This is because they want to see how much the
Speaker 1: already high interest rates will affect the economy and don't
Speaker 1: want to risk breaking something. Now. The last part of
Speaker 1: the Fed's meeting was about the f O m c
Speaker 1: s monetary policy decisions. This part of the minute mostly
Speaker 1: repeats everything from the previous sections. I couldn't help but
Speaker 1: notice that the wording is almost identical to what Jerome
Speaker 1: said during his press conferences. Copy paste is a powerful tool. Indeed,
Speaker 1: in all seriousness, the f O m C agreed that
Speaker 1: it must make it clear to the public that it
Speaker 1: will continue to monitor incoming data when it comes to
Speaker 1: future rate hikes. It seems that this is not being
Speaker 1: underscored enough because what's currently being priced in by investors
Speaker 1: is that the FED will pause and then pivot in
Speaker 1: any case, The f O m C also agreed to
Speaker 1: continue selling assets the central Bank's balance sheet. If you
Speaker 1: watched our video about Jerome Pal's testa means to politicians,
Speaker 1: you'll know he tacitly admitted that this balance sheet run
Speaker 1: off will eventually lead to higher interest rates. Also something
Speaker 1: nobody is noticing. Surprisingly, all members of the f O
Speaker 1: m C voted in favor of the seventy five basis
Speaker 1: point great hike and the other ongoing actions being taken
Speaker 1: by the FED, such as the balance sheet run off.
Speaker 1: This is surprising because it suggests that even the more
Speaker 1: dovish members of the f O m C realize that
Speaker 1: inflation will stick around for a while. This brings me
Speaker 1: to the big question, and that's what all this means
Speaker 1: for the markets in the coming months. In short, it
Speaker 1: could really go either way. From where I'm standing, the
Speaker 1: Fed has made it clear that it will adjust interest
Speaker 1: rates in response to inflation and employment statistics. In case
Speaker 1: you haven't noticed, things aren't looking too good on the
Speaker 1: inflation front. Large amounts of stimulus, supply chain issues caused
Speaker 1: by pandemic restrictions and yes, the war in Ukraine and China,
Speaker 1: zero COVID policies all look like they're going to keep
Speaker 1: inflation high. The most inflationary factor, however, seems to be
Speaker 1: the reassuring of supply chains. The disruptions to supply chains
Speaker 1: caused by all the above has pushed many countries to
Speaker 1: start bringing manufacturing back within their borders, especially the manufacturing
Speaker 1: of microchips. If you watched our recent video about Goldman
Speaker 1: Saxes analysis of the fed's two percent target, you'll know
Speaker 1: it's possible that we will be entering a prolonged period
Speaker 1: of higher inflation as a result. This begs the question
Speaker 1: of whether the FED would accept a three or four
Speaker 1: percent inflation rate, and the answer currently isn't clear. On
Speaker 1: the employment side, things are looking kind of sketchy. I am,
Speaker 1: by no means an expert in employment statistics, but I've
Speaker 1: been hearing in many macro podcasts that these stats are
Speaker 1: calculated in questionable ways. The same is true of inflation statistics,
Speaker 1: but we all knew that already. This begs the question
Speaker 1: of just how much the books can be cooked to
Speaker 1: convince the American public that the job market is doing
Speaker 1: just fine, or rather how hard. The f o MC
Speaker 1: can squint at the numbers until they see what they want.
Speaker 1: I reckon it'll be hard to keep up the illusion
Speaker 1: when the average person's own lying eyes start to notice
Speaker 1: that everyone around them is losing their job. I'm sure
Speaker 1: the fact checkers will come in with full force on
Speaker 1: that one, But so long as free speech on Twitter exists,
Speaker 1: the truth will find its way out. Thanks Ellen. In
Speaker 1: some then, it's going to be a very uncertain few
Speaker 1: months for both the FED and therefore the markets. Assuming
Speaker 1: the FED follows through on slowing the pace of rate
Speaker 1: hikes and pausing sometime early next year, we could finally
Speaker 1: see some recovery rallies in stocks, cryptocurrencies, and other assets.
Speaker 1: That said, I have a bad feeling that we're going
Speaker 1: to see a bearish catalyst that takes all assets much
Speaker 1: lower than they currently are, a catalyst that will shake
Speaker 1: retail investors to the corps and cause institutional investors to
Speaker 1: run screaming into the arms of the FED. Let's hope
Speaker 1: I'm wrong about that one. Earlier this year, we made
Speaker 1: two very important videos about crypto. One was about when
Speaker 1: the crypto bear market could end, and the other was
Speaker 1: about how low cryptocurrencies could go during the bear market.
Speaker 1: Over the last few months, we've been keeping a close
Speaker 1: eye on the indicators we identified in those two videos. Now,
Speaker 1: the good news is that they seem to be accurate.
Speaker 1: The bad news is that the bottom isn't in yet. Today,
Speaker 1: I'm going to explain why the crypto bear market will
Speaker 1: likely continue, when it's likely to end, and estimate how
Speaker 1: low cryptocurrencies could go before it's over. This is a
Speaker 1: video you don't want to miss. I want to start
Speaker 1: by saying that nobody knows the future, not even me.
Speaker 1: Everything in this video is based on the best information
Speaker 1: my research team and I could find. Note that this
Speaker 1: is information that could change at a moment's notice. It
Speaker 1: should also go without saying that nothing in this video
Speaker 1: is financial advice. That said, the first reason why the
Speaker 1: crypto bear market is likely to continue is because retail
Speaker 1: investors haven't capitulated yet. In other words, lots of regular
Speaker 1: crypto investors are still holding on to their coins and
Speaker 1: tokens despite some massive losses. This is also true for
Speaker 1: stocks and other assets with retail exposure. Now, that second
Speaker 1: point is significant because the prices of tech stocks and
Speaker 1: cryptocurrencies are highly correlated. This correlation has been as apparent
Speaker 1: in recent weeks as crypto specific factors such as the
Speaker 1: ft X Alameda situation have caused a slight decoupling. I'll
Speaker 1: come back to that in a moment now. There was
Speaker 1: some retail capitulation in mid October when inflation in the
Speaker 1: United States came in hotter than expected. This crash the
Speaker 1: stock market and caused a small flash crash in crypto. However,
Speaker 1: some sources suggest that most retail investors were still buying
Speaker 1: those dips. Not only that, but the stock market has
Speaker 1: been rallying since its recent October lows. This seems to
Speaker 1: be because the minutes of the Federal Reserves most recent
Speaker 1: meetings suggest that the central Bank will start slowing the
Speaker 1: pace of rate hikes in mid December. It's also believed
Speaker 1: that stocks will see a Santa Claus rally at the
Speaker 1: same time. It's possible that the stock market will crash
Speaker 1: in December when pension funds are forced to sell assets
Speaker 1: and regular people sell assets to finance their holiday shopping.
Speaker 1: It's also possible that the Fed will raise rates higher
Speaker 1: than investors are currently pricing in. This would also crash
Speaker 1: the stock market. Given the brutal macro backdrop of energy shortages, inflation,
Speaker 1: rising interest rates, pandemic restrictions, and the war in Ukraine,
Speaker 1: the likelihood of a dump seems higher than that of
Speaker 1: a pump. The technicals for stock indices like the SMP
Speaker 1: also suggests that stocks will soon resume their long term
Speaker 1: down trends. Regardless, the stock market will continue it's longer
Speaker 1: term down trend at some point. While the reversal could
Speaker 1: happen as soon as December, it's possible that it won't
Speaker 1: come until early next year when consumers realized they took
Speaker 1: on a bit too much debt during the holiday season
Speaker 1: and start selling. When the stock market correction inevitably comes,
Speaker 1: it will likely take the crypto market lower as well.
Speaker 1: The technicals for the now stacks suggest it could fall
Speaker 1: by around twenty from its current price in the next correction.
Speaker 1: This would bring the NASTAC back down to its pre
Speaker 1: pandemic levels, which would make sense. As I mentioned a
Speaker 1: few moments ago, the prices of tech stocks and cryptocurrencies
Speaker 1: tend to move in parallel. The only difference is that
Speaker 1: cryptocurrencies are more volatile. I have a high beta with
Speaker 1: the market. In practical terms, a twenty to drop in
Speaker 1: the NASTAC would translate to a forty to fift drop
Speaker 1: in large cap cryptos, and much more for those with
Speaker 1: smaller market caps. The second reason why the crypto bear
Speaker 1: market is likely to continue relates to the first, and
Speaker 1: that's all the speculation and leverage that we continue to
Speaker 1: see in the crypto market. As some of you will know,
Speaker 1: an easy way to measure speculation in the crypto market
Speaker 1: is to look at bitcoin dominance. For those unfamiliar, bitcoin
Speaker 1: dominance is a measure of how much of the total
Speaker 1: crypto market cap is just BTC. Because BTC is seen
Speaker 1: as the safest cryptocurrency, Bitcoin dominance tends to rise when
Speaker 1: the entire crypto market is falling, and bitcoin dominance tends
Speaker 1: to fall when the entire crypto market is rising. As
Speaker 1: you can see, bitcoin dominance has been stuck at around
Speaker 1: for more than a year, and though it did rise
Speaker 1: to almost fifty percent in June after terror collapsed, it
Speaker 1: has since fallen back down to around What this means
Speaker 1: is that money has resumed moving into all coins, and
Speaker 1: that means there's still lots of speculation. The caveat is
Speaker 1: that it's possible that E has also become a safe
Speaker 1: haven in the eyes of crypto holders. This means that
Speaker 1: part of Bitcoin's dominance is essentially being shared with ethereum. Unfortunately,
Speaker 1: the dominance for both has been on the decline, and
Speaker 1: this arguably proves that lots of speculation is indeed present.
Speaker 1: If you need more proof, consider that meme coins like
Speaker 1: doge coin were pumping as recently as last week. There
Speaker 1: have also been a few headlines about small and medium
Speaker 1: cable coins that have more than doubled in price over
Speaker 1: the course of just a couple of days. That is
Speaker 1: pure speculation or price manipulation. Until we stop seeing dog
Speaker 1: coin pump by double digits every time Elon Musk teases
Speaker 1: Twitter's upcoming features, then it's safe to assume that the
Speaker 1: crypto bear market bottom isn't in yet. Now, speculation is
Speaker 1: mostly the retail side of the equation. Leverage is where
Speaker 1: the institutions come in. Some of you may recall that
Speaker 1: there was a record level of eath liquidations at the
Speaker 1: end of October when leverage traders got wrecked to the
Speaker 1: tune of half a billion dollars over two days. The
Speaker 1: collapse of ft X and Alameda also led to around
Speaker 1: a billion dollar of liquidations for BTC and E in
Speaker 1: the days that followed. Funnily enough, recent research by coin
Speaker 1: shares suggests that institutional investors have been shorten the crypto
Speaker 1: market at record levels. This logically means that they will
Speaker 1: get liquidated at record levels if the crypto market somehow
Speaker 1: rallies in December, which is possible given what I mentioned earlier.
Speaker 1: It's important to remember that leverage doesn't just mean trading either.
Speaker 1: Many institutions in cryptocurrency have given each other massive loans
Speaker 1: over the last couple of years. Some of these loans
Speaker 1: involved cryptocurrencies which have since fallen significantly. The elephant in
Speaker 1: the room in this regard is f t X and
Speaker 1: Alameda Research, whose ft T back loans eventually led to
Speaker 1: their bankruptcies. If the headlines didn't make it clear enough,
Speaker 1: the contagion of leverage between these and other crypto companies continues,
Speaker 1: and it looks like Genesis Global will be the next
Speaker 1: two collapse. More about that in the description anyways. The
Speaker 1: third reason why the cryptobar market is likely to continue
Speaker 1: is because Bitcoin's hash rate hasn't crashed yet. For context,
Speaker 1: bitcoined hash rate has historically fallen by between forty and
Speaker 1: fifty around the time that BTC hit its bottom, and
Speaker 1: of course BTC leads the rest of the crypto market.
Speaker 1: Bitcoin's hash rate collapsing around btc's bottom makes sense on
Speaker 1: both sides of the cause and effect relationship. If BTCS
Speaker 1: price falls, then it becomes unprofitable to mine BTC. This
Speaker 1: forces the least profitable bitcoin miners to shut up shop,
Speaker 1: which causes Bitcoin's hash rate to fall. As some of
Speaker 1: you may have heard, lots of bitcoin mining companies are
Speaker 1: starting to struggle, particularly the publicly traded ones. To give
Speaker 1: two examples, in late September, Compute North filed for bankruptcy,
Speaker 1: and in late October Core Scientific warned it was on
Speaker 1: the brink of doing the same. This is because the
Speaker 1: average cost of mining a BTC is currently around eighteen
Speaker 1: k and the BTC price is below that at the
Speaker 1: time of shooting. This means that most bitcoin miners are
Speaker 1: losing lots of money and have likely been selling lots
Speaker 1: of their existing BTC to stay afloat. This is evidenced
Speaker 1: by glass nodes Minor net position change indicator, which suggests
Speaker 1: bitcoin miners have been aggressively selling BTC since it's price
Speaker 1: dropped below twenty k. It's possible that this selling has
Speaker 1: suppressed BTCS price, but it's probable that most of this
Speaker 1: BTC is being sold over the counter or OTC. If
Speaker 1: you watched our video about bitcoin miners selling BTC, you'll
Speaker 1: know that the lowest price BTC can go before the
Speaker 1: Bitcoin blockchain is at risk is eight k. The thing
Speaker 1: is that this was back in August, when Bitcoin's difficulty
Speaker 1: was twenty lower, and it therefore required much less energy
Speaker 1: to mine one BTC. What this means is that the
Speaker 1: lowest price BTC could go before Bitcoin itself is in
Speaker 1: trouble is now just under ten k. However, this assumes
Speaker 1: that the Bitcoin difficulty will stay the same or increase.
Speaker 1: This is unlikely, as Bitcoin's hash rate has finally started
Speaker 1: to decline. As miners go bust, difficulty will decline. Accordingly,
Speaker 1: this brings me to the other side of the cause
Speaker 1: and effect relationship of Bitcoin's hash rate and BTCS price.
Speaker 1: As I just explained, a decline in BTCS price can
Speaker 1: cause a decline in Bitcoin's hash rate. However, a decline
Speaker 1: in Bitcoin's hash rate can also cause a decline in
Speaker 1: BTCS price. China's crackdown on crypto mining. Last May is
Speaker 1: a great example. Bitcoin's hash rate fell first as miners
Speaker 1: were forced offline and BTCS price followed. This is because
Speaker 1: the news of a crypto mining ban in China was
Speaker 1: very bearish, especially since other countries started raising concerns about
Speaker 1: Bitcoin's energy use. You can find out why those concerns
Speaker 1: are unfounded using the link in the description. I digress
Speaker 1: now believe it or not, but Bitcoin could be about
Speaker 1: to see the same cause and effect relationship play out.
Speaker 1: That's because winter is coming and countries are trying to
Speaker 1: conserve energy. The European Union recently warned that it would
Speaker 1: put a pause on crypto mining in the event of
Speaker 1: an energy shortage. In Canada, the province of Quebec is
Speaker 1: trying to get approval from the federal government to end
Speaker 1: its contracts with crypto minors, citing energy use concerns. The
Speaker 1: U S state of New York recently passed a two
Speaker 1: year crypto mining ban for environmental reasons, and we could
Speaker 1: see similar degrees from other states. I suspect that a
Speaker 1: crash in BTCS price, combined with crypto mining bands in
Speaker 1: certain countries, will be enough to bring bitcoin's hash rate
Speaker 1: down by the forty to it has fallen in previous
Speaker 1: cryptobear markets. Again, chances are that BTCS price will bottom
Speaker 1: around the time this happens, along with other cryptos. The
Speaker 1: fourth reason why the cryptobear market is likely to continue
Speaker 1: is the upcoming global energy crisis that's already being felt
Speaker 1: acutely in many countries. The one that comes to mind
Speaker 1: the most for me is Ukraine, with eighty percent of
Speaker 1: the country reportedly being without power due to Russian attacks.
Speaker 1: Although Ukraine will likely be able to repair most of
Speaker 1: its energy infrastructure, it probably won't be enough to prevent
Speaker 1: another wave of refugees from fleeing to neighboring European countries.
Speaker 1: In case you missed the memo, other European countries aren't
Speaker 1: doing so well on the energy side either. As such,
Speaker 1: the influx of refugees alone could lead to blackouts in
Speaker 1: some countries. This is because many European countries have said
Speaker 1: they can avoid blackouts if citizens can't serve enough energy.
Speaker 1: Something tells me they didn't factor in the demand coming
Speaker 1: from millions of new refugees. European politicians also don't seem
Speaker 1: to be factoring in the practical effects their proposed price
Speaker 1: cap on natural gas will have. Setting a price cap
Speaker 1: means that the demand for gas won't come down to
Speaker 1: match supply. This means that gas shortages are almost guaranteed,
Speaker 1: and history as shown this to be the case. If
Speaker 1: that wasn't bad enough, the United States and its allies
Speaker 1: will be imposing a price cap on Russian oil starting
Speaker 1: on the fifth of December. Naturally, the U s Department
Speaker 1: of the Treasury has threatened to sanction any country that
Speaker 1: violates this price cap. Meanwhile, the Russian government recently announced
Speaker 1: that it will stop exporting oil to any country that
Speaker 1: goes along with the price cap. This means that the
Speaker 1: countries that comply with the price cap could soon be
Speaker 1: short on oil, and this comes at a time when
Speaker 1: OPEC has cut global oil production already on the demand
Speaker 1: side of the equation. Meanwhile, we have the United States,
Speaker 1: which will soon be looking to refill its Strategic Petroleum Reserve,
Speaker 1: which has been emptied by the current administration in a
Speaker 1: bid to keep inflation low. Many investors are also expecting
Speaker 1: China's economy to open up again sometime early next year.
Speaker 1: The recent protest against the CCPs pandemic policies suggest China's
Speaker 1: reopening could happen much sooner than initially expected. If it does,
Speaker 1: it will create a massive surge in manufacturing related energy demand.
Speaker 1: These and other factors will cause energy prices around the
Speaker 1: world to skyrocket over the winter. This will do direct
Speaker 1: damage to the economy in the form of higher prices,
Speaker 1: and it will do indirect damage to the economy in
Speaker 1: the form of higher interest rates from central banks trying
Speaker 1: to fight inflation. Obviously, it's difficult to see how the
Speaker 1: crypto market could go in any other direction, but down
Speaker 1: in these kinds of conditions. Never mind the crypto mining bands,
Speaker 1: there will be millions of people selling everything they can
Speaker 1: to keep the lights on in their homes and businesses.
Speaker 1: That includes cryptocurrencies. The fifth reason why the crypto bear
Speaker 1: market is likely to continue ties into the fourth, and
Speaker 1: that's the uncertainty around how high interest rates will go
Speaker 1: and how high they will stay. This ultimately depends on
Speaker 1: how high inflation goes and how high it will stay,
Speaker 1: something will only know in a few months time. This
Speaker 1: is probably why investors currently expect the Fed to stop
Speaker 1: raising interest rates sometime early next year. To be clear,
Speaker 1: stopping rate hikes isn't the same as bringing interest rates
Speaker 1: back down. Rate cuts aren't expected to occur until later
Speaker 1: next year at the earliest, and could come as late
Speaker 1: as early to four. Then again, rate cuts could come
Speaker 1: much sooner if something in the economy starts to break
Speaker 1: because of high interest rates. This is basically why there
Speaker 1: is a correlation between the FED dropping interest rates and
Speaker 1: the bottom of a stock market cycle. Something broke, so
Speaker 1: the FED dropped interest rates in response. More often than not,
Speaker 1: the thing that would break was the stock market. This
Speaker 1: is why investors have become so conditioned to buy the dip.
Speaker 1: They expect the FED to step in to save the
Speaker 1: stock market every time it crashes to record lows, because
Speaker 1: this is what the FED has been doing for years.
Speaker 1: This time it's different, however, and I know it's a
Speaker 1: cliche to say that, but it really is. Inflation is
Speaker 1: the highest it's been in almost half a century. Central
Speaker 1: banks must bring this inflation down at all costs, or
Speaker 1: else it will do even more damage to the economy
Speaker 1: and could even lead to hyper inflation of some fear currencies. However,
Speaker 1: this doesn't mean the FED won't blink when something breaks.
Speaker 1: It's just that the threshold for what needs to break
Speaker 1: is much higher than the stock market dropping by double digits.
Speaker 1: As it so happens, some Fed officials are starting to
Speaker 1: get concerned that something big will break if they keep
Speaker 1: hiking rates. This is why the Federal Open Markets Committee
Speaker 1: or f o m C, agreed it would be appropriate
Speaker 1: to start slowing the pace of rate hikes. If you
Speaker 1: watched our video summarizing the minutes of the feds aforementioned meeting,
Speaker 1: you'll know the Central Bank may stop raising rates as
Speaker 1: soon as January. Now, this is all well and good,
Speaker 1: but I'll reiterate that pausing is not the same as pivoting.
Speaker 1: Depending on the inflation situation, we could see lots of
Speaker 1: capital flow to traditionally safe haven assets like government bonds
Speaker 1: and precious metals. It's possible that cryptocurrencies like BTC will
Speaker 1: be a part of this basket, but the fact of
Speaker 1: the matter is that investors see bitcoin and other large
Speaker 1: cap cryptocurrencies as being akin to tech stocks. These kinds
Speaker 1: of assets will continue to struggle in a high interest
Speaker 1: rate environment, which again could last until the final reason
Speaker 1: why the crypto bear market is likely to continue has
Speaker 1: to do with technical analysis. If you're subscribed to my
Speaker 1: weekly newsletter, or have been keeping up to date with
Speaker 1: our weekly crypto reviews, you'll know that I've been watching
Speaker 1: a massive bare flag form on Bitcoin's monthly chart for
Speaker 1: months now. This massive bare flag seemed to have finally
Speaker 1: broken last month. I had initially expected it to break
Speaker 1: back in July, but BTC managed to hold on for
Speaker 1: three more months before breaking down. This begs the question
Speaker 1: of just how low this bare flag will go, and
Speaker 1: the answer really depends on how you measure it. If
Speaker 1: you measure from the initial bare flag from three months ago,
Speaker 1: then BTC is headed for the ten k range, and
Speaker 1: in my opinion, this is the last stop. However, if
Speaker 1: you measure from the more recent breakdown, then it's possible
Speaker 1: that we've already seen the bear market bottom at around
Speaker 1: fifteen K. What's interesting is that we saw the same
Speaker 1: double bare flag pattern on btc's monthly chart during the
Speaker 1: previous crypto bear market in back then. The second breakdown
Speaker 1: initially looked like the bear market bottom, but in the
Speaker 1: months that followed, BTC hit the target of the initial
Speaker 1: break down to four K. As the saying goes, history
Speaker 1: doesn't repeat, but it does rhyme. Considering all the factors
Speaker 1: I've mentioned in this video and others. It's quite possible
Speaker 1: that we will see something similar happen again. After all,
Speaker 1: there's no shortage of bullish crypto catalysts coming in early
Speaker 1: to mid twenty three that could cause a recovery. More
Speaker 1: about that in the description. Now, before I go, I
Speaker 1: want to bring your attention to one last indicator, and
Speaker 1: that's the balance of BTC on cryptocurrency exchanges. As you
Speaker 1: may have heard, the balance of BTC on exchanges is
Speaker 1: the lowest it's been in almost five years. This means
Speaker 1: that btc s price is going to be very volatile
Speaker 1: in the coming months, and that means that the kind
Speaker 1: of technical analysis we just did maybe way off the target.
Speaker 1: For instance, BTC could temporarily for much lower than ten
Speaker 1: k due to a lack of liquidity and liquidations by
Speaker 1: any leverage traders who are left. This means that you
Speaker 1: need to be extremely careful if you're planning on trading
Speaker 1: cryptocurrencies in the coming months. I will be dollar cost
Speaker 1: averaging into promising crypto projects, and you can find out
Speaker 1: which ones are be accumulating by signing up to my
Speaker 1: weekly newsletter. The link for that will be in the description. Anyways,
Speaker 1: Thank you so much for watching guys, and I will
Speaker 1: see you next time. Thank you so much for listening
Speaker 1: to the coin Bureau podcast. If you'd like to learn
Speaker 1: more about cryptocurrency, you can visit our YouTube channel at
Speaker 1: YouTube dot com forward slash coin Bureau. You can also
Speaker 1: go to coin bureau dot com for loads more information
Speaker 1: about all things crypto. You can follow me on Twitter
Speaker 1: at at coin bureau or one word, and I'm also
Speaker 1: active on TikTok and Instagram too,