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Oil, Tesla and Bitcoin

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Avatar for ekrem
Written by   11
2 months ago

There has been a long-lasting rumor in the market that all the Middle East wars. The fundamental core issue is the struggle for oil resources. The several Middle East wars in which the United States participated were also aimed at maintaining US dollar hegemony and Major global oil transactions are settled in U.S. dollars. The advent of the electric vehicle industry is likely to accelerate the collapse of oil companies? For panic investors, halving is coming, is there still a bull market? When does the currency price rebound?

Oil war triggers global stock market disaster

In early March, the Fed announced an emergency rate cut. This is the first rate cut by the Fed after the 2008 financial crisis. On Friday, the OPEC meeting failed to negotiate. After Russia withdrew from the transaction, due to the failure of oil exporting countries to reach an agreement on production cuts, Saudi Arabia unilaterally announced its agreement with Russia. The oil war started. On March 8, the Saudi stock market plummeted, and the Kuwaiti stock market melted for the first time. On March 9, Brent crude oil plummeted by 30%, the largest drop since the 1991 Gulf War. On the same day, the global market fell into a panic-like plunge: Kuwait's stock market melted down again, U.S. stocks melted down, Brazil's stock market melted down, and European, Australian, Thai, UAE and other multinational stock indexes hit their biggest one-day decline since the 2008 financial crisis. Japan, Russia and other countries officially Enter a technical bear market.

Historically, Saudi Arabia has waged three crude oil wars. Including 1985, after several years of OPEC production cuts, Saudi Arabia launched a price war, after which oil prices plummeted by nearly 70% in the next six months. In 1997, Venezuela's overproduction caused Saudi Arabia to fight again. Oil prices fell by 50% in the following year and a half. In 2014, Saudi Arabia failed to persuade countries, including Russia, to join the production reduction plan, and the war began again. The price dropped by 65% ​​in the following year and a half.

From the reasons summarized by everyone, one is the spread of the epidemic globally, resulting in weak demand expectations and falling oil prices; the other is the breakdown of OPEC and Russia's crude oil production reduction negotiations, and Saudi Arabia decided to increase production and sell crude oil at a discount and open prices War and caused the plunge.

Iteration of new industries exacerbates stock market fight

So the question is, why can Saudi Arabia have had such a huge impact in the past several oil crises? The core behind petrodollars this nature, has been enduring a market rumors that all of the Middle East war, the fundamental core issue is competition for oil resources, while the US participation in several Middle East war, its The purpose is also to maintain the hegemony of the US dollar, so that the world's major oil transactions are settled in US dollars.

However, petrol dollars will also encounter two important problems. One is oil itself. The future world is an electric era. All transportation vehicles will gradually move towards electrification. The demand for oil is greatly reduced. The current economic environment and cycle Different, this crude war is not the same as the previous three times. Previously, it was in the upward phase of the economy, and it was a competition between incremental markets, but this time it was basically a stock market fight. Who will pay for the plunge in oil prices in the end, and what will happen when the supply is far greater than the demand?

The era of the new energy electric vehicle industry represented by Tesla is approaching, and the demand for oil is also constantly decreasing. Will this accelerate the collapse of oil companies?

Twilight of stocks and bonds killing US dollar hegemony?

Crude oil is the source of the upstream industry. The decline in crude oil will accelerate the mass production of materials in the upstream industry, but the actual market demand cannot meet the supply of production materials. At this time, the upstream industry is reluctant to sell and the market material prices have skyrocketed. As a result, prices in the market have skyrocketed, but the actual excess means of production has either been destroyed or dumped out.

Coincidentally, at this time, the US dollar has been in a state of oversupply in the past few decades. Petroleum dollars, crude oil fell, and the US dollar will continue to oversend to maintain balance . The world ’s assets are all denominated in US dollars. If the US dollar is oversold, it will cause various other currencies to rise in name. After the rise, these moneys have no actual gain, but they have risen on the surface. What should we do? Is to add to various industries to cause inflation.

Subsequently, the Fed's sudden and sharp interest rate cut wanted to curb this financial turmoil , but the market's response was: the Dow Jones index plummeted from a maximum of 29,500 to a minimum of 24,681, a decrease of 16%; the Nasdaq index plummeted from a maximum of 9888 to 8264, a decrease of 16.0%; The S & P 500 ETF fell from a high of 339 to a low of 285, a drop of 15.9%.

Coupled with the further rise in US Treasury prices, yields are still falling. The 10-year U.S. Treasury bond ’s implied yield has broken down by 0.5%, which has hit a record low. The 30-year U.S. Treasury yield has fallen below 1%. It was below 1% for the first time and reached a historical low of 0.98%. The US financial market can be described as a double kill of stocks and bonds. This is unprecedented. This will turn into a vicious circle.

Under the nest, the maggot has finished eggs

Faced with the turbulent economic situation, global financial assets have been sold off in a frenzy, and for a time, concerns about a new global financial crisis have begun to spread. At this time, Bitcoin's performance during the last financial crisis affected many people's nerves. Compared with traditional financial markets, Bitcoin's current correlation with traditional financial markets is very low.

This time Bitcoin has plunged together with traditional financial markets for the following reasons:

First of all, the digital asset market has risen by about 40% from January 2020 to now, exceeding the expectations of an investor. It is normal and healthy for a large correction.

Secondly, the market's overhype on bitcoin halving has caused some market participants to be afraid to miss the opportunity and enter the market. If a thing is concerned too hot, the risk will become higher and higher, resulting in more and more downside space and less and less upside space.

Once again, this time various assets such as the stock market and gold are being sold off, and Bitcoin is not immune. One reason is that the overall financial market panic caused by viruses and the global economic slowdown. People will use cash at this time. Be king, not buy these safe-haven assets.

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Avatar for ekrem
Written by   11
2 months ago
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