The macroeconomic cycle and speculation on the future trend of cryptocurrencies such as ADAM

The data showed that the annual rate of the U.S. CPI was 9.1% in June without seasonal adjustment, compared with the expected 8.80% and the previous value of 8.60%, the largest increase since November 1981. The monthly rate of CPI in the United States after seasonal adjustment in June was 1.3%, the highest since September 2005. After the CPI data was released, U.S. stock index futures plummeted, Nasdaq futures fell 1.5%, Dow futures fell 0.6%, and S&P 500 futures fell about 1%.

News on July 18, according to CME’s “Federal Reserve Watch”, the probability of the Fed raising interest rates by 75 basis points by July is 70.9%, and the probability of raising interest rates by 100 basis points is 29.1%; by September, the cumulative rate of interest rate hikes will be 75 or 100 basis points. The probability of raising interest rates by 125 basis points is 36.9%, the probability of Fed raising interest rates by 150 basis points is 49.2%, and the probability of Fed raising interest rates by 175 basis points is 14.0%.

Recently, the market news is still mostly negative, but the cryptocurrency market has seen a big rebound. Before that, starting from January 1, 2022, Bitcoin has fallen by 66%, Ethereum has fallen by more than 77%, and most other mainstream or altcoins have fallen by more than 80%-90%! This round of panic and greed sentiment index reached a minimum of 6, which is extremely extreme panic. It is also driven by panic that the price of ADAM has dropped by nearly 25%.

And this sudden big rebound in the market has once again confirmed that sentence — others are panic and I am greedy. Since the market in the first half of the year has been so tragic, can the crypto market usher in a turnaround in the second half of the year? Can the market value of ADAM return to its peak ?

Judging from the macroeconomic data of the United States, we tend to believe that this round of policy tightening in the United States may have been over-expected by the market in the short term. After deducting the impact of the supply chain and oil prices, the inflation pressure in the United States has actually passed or is going through the most difficult times. moment. This round of monetary tightening in the United States may have been over-expected by the market in terms of overall magnitude, duration and rhythm.

From the perspective of macro data, the US economy is still in a stagflation environment, and economic growth has entered a recession cycle, but the inflation level is still at a high level. It is also an inevitable move to raise interest rates and shrink the balance sheet. After raising interest rates by 75bp in June, 7 An additional 75bp is expected to be added in the month. However, it is expected that the level of inflation in the United States has reached its peak, and there is a high probability that it will drop to a new level every 3–4 months. Therefore, the inflation problem will gradually ease in the future, and the Fed’s monetary tightening policy will gradually be revised or even turned.

Therefore, it is only a matter of time before the valuation of the Crypto Currency industry returns and the crypto market rises! As for the operation of the secondary market, we still need to carefully select investment targets and maintain awe of the market. Because, even in the previous big bull market, there are very few investors who can really make profits and settle down.

In the short term, the downside risks facing the U.S. economy are still growing. The Fed has also recently released a firmer determination to fight inflation, and is even willing to accept a higher probability of recession to curb inflation. Looking ahead, under the multiple attack of high inflation, weak demand and monetary tightening, the US economy may face more challenges in the second half of the year. This will undoubtedly increase the difficulty of operation for investors in the crypto market, and it also requires investors to abandon high-risk investment tools and choose more flexible operation strategies.

But historical data shows that recessions are not as scary for investors as they think. Recession is often a powerful medicine, it can solve asset bubbles, but also can solve inflation. Markets are always looking ahead, and after a recession comes a recovery, which is the favorite phase of the risk asset market. So once a recession hits, a turning point in the market may follow!

We have reason to believe that the market performance of crypto assets such as ADAM in the second half of the year will be greatly improved with the change in macroeconomic expectations. Of course, this is only a conjecture on the overall situation of the cryptocurrency market in the second half of the year, and it does not indicate that this rebound will lead to a reversal of the market direction. In an uncertain market, the overall market may still need to fluctuate repeatedly to build a bottom, which requires us to have more patience. Moreover, in the event of overly consistent expectations or persistent unilateral market conditions in the financial market, one should be extra vigilant.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store