It's been a couple of tough weeks for crypto. All was proceeding quite well until a trio of events occurred simultaneously: a rise in the Consumer Price Index (CPI) and hence inflation; mounting world debt concerns; and Elon Musk's reversals on #Doge and #Bitcoin. But don't panic yet, good news is ahead!
All of the above-mentioned sent most cryptocurrencies into a veritable nosedive. But I remain unfazed, not worried. I trust crypto over any of the world's fiat currencies. Then again, I like gold, silver and the art of bartering. (For those that are unable to invest in crypto, I highly suggest you learn how to effectively barter).
As previously mentioned in a post a several days ago, the cost of a measurable basket of essential goods increased (CPI). Any time this occurs, inflation comes right along with it as a result, and the value of fiat currency loses its buying power. People get scared. They don't want a return to the 1970's. Gasoline and lumber have skyrocketed (among other goods).
While The Fed has an objective to maintain inflation at 2%, that is unlikely to occur, especially given the continuance of qualitative easing (QE). This practice pumps more fiat money into the economy (out of thin air) and creates a rise in the stock market and also keeps interest rates low.
Here's the thing about The Fed: it possesses the difficult task of obtaining full employment and keeping CPI prices stable. With inflation, which is occurring as I write, investors in the stock market get spooked. They watch anything The Fed does and respond accordingly. With the ongoing pandemic, The Fed has no qualms about inflation exceeding their 2% threshold goal, expecting investors to understand. The catch is this: if inflation gets too high, The Fed has to make a move to change monetary policy. This means a tightening of money. But any tightening of monetary policy equates to higher interest rates and an unserviceable debt. In short, then, the inability to pay interest on loans.
Given the above scenarios, The Fed finds itself in a veritable quandary: what to do?As it stands, it's credibility it faltering and politicians have been calling to audit The Fed for years. In the end, what we observe is that the heated economy driven by QE keeps the stock market thriving, but one should take note that it's a growing bubble, and on the verge of bursting unless The Fed acts.
According to the International Monetary Fund (IMF), anytime a country's debt-to-GDP ratio rises to 80% or above, a debt crisis is imminent or at least eventual. The United States, Bank of China, Bank of England, and Bank of Japan are all in the same financial debt boat. Without action, the boat will continue to take on water and sink, perhaps signaling the end of fiat currencies on a global scale, and the hedge that cryptocurrencies were initially designed for, will serve as protection against unsound government fiscal policies.
Fiat currencies are historically doomed to failure. Government's cannot continue to print money without an eventual backlash. At any rate, when government's rise interest rates, additional debt ensues. Right now world governments are essentially balancing a medicine ball on a pogo stick. Their collective monetary policies are unsustainable. This is why I believe some country's are moving to a central bank digital currency, fearing a fiat money collapse.
It's a given that Musk is extraordinarily rich and is a genius of sorts. Untold investors around the globe (50 million plus) listen to everything he says. For example, he pumped #Doge and then pretty much dismissed it on Saturday Night Live. Before his appearance, however. #Doge coin exploded. Afterwards, it sank.
Musk's Tesla also purchased $1.5 billion in #Bitcoin and had plans to accept the cryptocurrency in payments for his electric cars and parts. Bitcoin went nuts. Then, whether on advice from his Board of Directors or not, Elon reversed course and jumped on the Green bandwagon, stating #Bitcoin was using too much energy to mine coins. Admittedly, he has a beef, but why such a quick turnaround?
It occurs to me that Elon fancies himself the King of crypto: he waves his verbal wand on Twitter (and TV) and things happen, for good or bad. Of note, Tesla has not sold its $1.5 billion in #Bitcoin as of yet.
It also occurs to me that Elon Musk is the epitome of a hypocrite. What about his space rockets and manufacturing of batteries? Do these not also consume vast amounts of energy? Of course they do! Does he plan to stop? Not a chance.
Finally, I'd expect the eventual outcome of Elon's plan to cease taking #Bitcoin for the purchase of Tesla vehicles will have virtually no effect. What, maybe 25 people would be interested in buying a Tesla with Bitcoin? That's a stretch! Instead, wise investors are waiting for a turnaround when all the hyperbole quiets down. Conversely, panic HODLer's are selling. Not too smart!
Knowing full well that fiat currencies are doomed to fail and that world government fiscal policies are faltering, new cryptocurrencies are frequently entering the crypto market. This expansion provides investors with a hedge against global fiat currencies. Coins like #Bitcoin Cash and #Cardano have the ability to make inexpensive trades and be used for quick purchases. #Cardano is a coin to watch as is the fork from #Ether.
The entrance of so many cryptocurrencies breeds complexity for investors, especially us small ones. What to buy, trade or sell off? Even the most experienced investors with years of experience have difficulty keeping up with everything. They rely on trends and optimism. Just two weeks ago a noted crypto expert advised to buy #Doge, as he predicted it would surpass $10. Then came Elon with his venomous spiel and #Doge went south in a New York heartbeat.
As of this writing, there are in excess of 4,000 cryptocurrencies. Imagine, if you will, making a noble attempt to keep track of their rise, fall and trends. Impossible. You'd have an easier task filling a kitchen sieve with expensive bourbon.
The good news is this: fiat currencies will eventually fail, but knowing when is unpredictable. Enter cryptocurrencies. They are our hedge, our protection! Personally, I am into #BCH, #Cardano and #Adventas (set to release in 2022, we hope). I've amassed a boatload in anticipation.
The bottom line is not to panic with the dip we are observing but buy what you can, never investing more than you can afford to lose. It's also wise to look at precious metals and, again, how to barter. When the #SHTF, as it eventually will, you'll need something to fall back on to survive.