What’s going on with cryptos?
This question has come to me a lot recently. My answer is always the same. Have you watched the news recently? ( or Crypto news )
The world right now is going crazy with house prices rising, petrol costs on the roof, food getting so expensive, and war. It looks like we are in a resection, so cryptocurrency is affected. Even do we believe that cryptocurrency is separated from the financial system in theory yes, but practically not.
What do I mean by that?
Simply put; there is a tense situation in the market for whatever reason, the investors are going to be more conservative. Cryptocurrency per se is a risky business to get involved in, and in a tense situation is not your first choice. Before all this happened there were big companies that were investing heavily in the crypto market, and since the collapse of Terra (luna) and all the economic struggle they stopped suddenly. Recently the Fed Just released the annual report and I going to make a summary of it.
Fed annual report
There are 4 categories of economic vulnerability that the Fed pays attention to.
- Excessive borrowing by households and businesses.
- Elevated valuations such as stocks that are trading much higher than what their actual profits justified.
- Excessive leverage in the financial system risk-taking in the form of saying large speculative trades on a video game retailer, and funding risks.
- Bank runs which are when everyone rushes to pull their money out of a financial institution at the same time.
These four economic vulnerabilities are not mutually exclusive quite the contrary they can and often do interact, and therefore have the potential to turn what would otherwise be a small economic disruption into a widespread economic catastrophe.
Dive deep in the report
The first part of the fed’s financial stability report concludes with the results of a survey of market participants conducted by the feds failures, as you can see most of them are worried about the war in Ukraine, inflation, and market crash, foreigners selling off US assets, and higher energy prices, at second last one caught my eye because I can’t help but think that it relates to the seizure of the Russian central bank’s assets in response to its countries invasion of Ukraine. Another thing to pay attention to is that the yield on the two-year treasury briefly exceeded the yield on the 10 years at the end of March, and the two continue to be uncomfortably close.
Why this is so important?
Because is called a yield curve inversion and it’s seen by many market participants as a sign that a recession is coming that’s because under normal economic conditions interest rates on longer-term debt are higher due to the increased risk and opportunity costs involved. When interest rates on short-term debt are higher something is broken.
Watch Closely For New Cryptocurrency Opportunities
As soon as the crypto market starts to show signs of recovery, you’ll want to be watching closely for new opportunities to invest in new projects that could be the next big thing. Make sure you are investing in legitimate projects with a realistic growth plan. Keep an eye on regulatory changes for your region. Some countries have made it illegal for citizens to invest in certain types of crypto, so be sure to do your research and find out what’s available to you. Watch the news and follow industry influencers closely to stay up to date on the latest news and developments in the crypto world.
The bear market will pass, and when it does, those who prepared for it and stayed the course will be in a great position to profit from their crypto investments. While it’s important to stay informed and cautious during the bear market, it’s also important not to let it keep you from investing altogether. You can minimize your risks by diversifying your holdings, keeping your eye out for new opportunities, and HODLing until the market starts recovering.
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