Global markets will likely crash in the next ~2 months, and how I believe #Bitcoin & #crypto will be affected.
/thread
/1. Unemployment Benefits Ending
Enhanced unemployed benefits for ~14m+ (in US alone) are scheduled to end completely by Sept. (~10 states have ended early).
Transfer payments are a big component of 'CARES' act that helped boost incomes above normal levels since the pandemic.
/2. Rent Eviction Moratoriums, Mortgage Forbearance, Student Loans Deferment Periods, etc
Along with the phase out of Enhanced UI benefits / PUA, we have a number of factors on the opposite side of the equation that will increase expenses / debt payments for millions.
/3. These factors will act as a headwind, preventing capital from finding its way into many parts of the economy.
Higher Expenses (debt payments) = Credit Contraction = Currency Destruction (i.e. less discretionary spending for risk-on assets) / Lower Inflation
/4. Delta Cases as a Black Swan
COVID 'Delta' variant case numbers have thus far been hidden under 'normal' COVID cases (hiding their increase).
The 'Delta' strain is also much more contagious, & seems novel enough to exhibit resiliency against readily available vaccinations.
/5. Housing Market Topping ?
a.) Home buyer sentiment (leading indicator) - hits all time low, even as incomes risk. What will happen when incomes fall off a cliff in Sept?
b.) Weeks of work needed to buy median home reaches near record high - Levels not seen since 2008 GFC.
/6. Leverage Near All-Time Highs
Traders borrowing funds that they do not own (margin credit), to purchase speculative assets in hopes that they will continue to go up forever is at record levels.
/7. Brokers & Exchanges assign 'buying / leverage' power based on current value of the underlying held account assets.
This is great when said underlying assets continue to go up (more margin is allowed as collateral value increases) - when this reverts, the opposite occurs.
/8. Bond Market Bullish & Lower Yields
When financial conditions get tight, yields head lower (as demand for credit decreases) - therefore, when yields lower, equities soon follow.
/9. High-Spec Retail Saturated Meme Stocks Topping
One of the most relatable signs of the current reflation trade has been signature 'Meme' stocks such as Gamestop (GME) & AMC.
One thing is easily identifiable : Everyone in retail who 'wanted a piece', has already had a chance.
/10. High-Spec Retail Saturated Cryptos Reverting
Alts, especially hype driven 'retail friendly' alts, love to revert to their prior break-out points post hype cycle. Typically this means a complete cycle retrace.
One look at the charts on many, and it's clear to see.
/11. How Will $BTC / #Alts be affected ?
A relevant comparison could be the March '20 COVID crash - a margin-driven liquidity evt. affecting markets.
One pro in crypto's corner : A ~50% haircut from ATH's has already taken place, so further selling could be muted below $30k.
/12. With that said however, it is not unreasonable to assume aforementioned high-spec retail driven 'meme' altcoins to suffer most dramatic volatility during any market event.
$BTC could fair best (ala March '20), rallying off oversold levels - giving an entry of a lifetime.
/13. Conclusion
Many believe inflation (on assets, goods & services) is here to stay, at least in short-term.
The data shows this likely not to be the case.
$BTC & #Crypto could take a brief hit in this scenario, but selling pressure could be muted as many are well off highs.
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