The market isn’t surging anytime soon — so get used to dark times

Global markets are going through a difficult period, including the cryptocurrency market. But judging by the conversations in the peanut gallery, it seems some observers haven’t gotten the memo.

“We feel we are relatively safe in the mid-term,” Twitter’s “CryptoKaleo,” aka simply “Kaleo,” – he wrote in a Sept. 12 tweet to his 535,000 followers, referring to the U.S. midterm elections in November. The prediction was accompanied by a chart indicating his belief that the price of Bitcoin (BTC) would rise to $34,000, a 50% gain from its roughly $20,000 level last week, before the end of the year .

“Of course we can bleed lower,” his also mega-influential Twitter handle Pentoshi he wrote in a letter dated September 9 to his 611,000 followers. “But the market at this value is much more attractive than it has been in over a year. […] Got some $BTC yesterday / no highs but I’ll be kicking.”

These assessments come from “respectable” observers, those who have periodically been correct in the past. A gentleman in my inbox today, a Charlie Shrem looking to sell his “investment calendar,” assured readers that a “major crypto process” could begin tomorrow. Look further, and it’s not hard to find even more bullish predictions, like now prediction that Bitcoin is on the cusp of a 400% surge that will take it to an all-time high price of $80,000 and a market cap of $1.5 trillion, $500 billion more than the value of the entire silver on Earth

It’s good to see optimism spreading, even if it’s mostly among influencers looking for engagement and paying customers. Unfortunately, macroeconomic headwinds indicate that the reality is a little darker, perhaps a lot darker.

Last week, FedEx underscored the possibility that economic conditions could worsen with its announcement that it had fallen $500 million short of its first-quarter revenue target. “These numbers don’t bode well,” CEO Raj Subramaniam noted in an interview with CNBC. His comments, which included a prediction that the numbers represented the start of a global recession, led to a 21% end-of-week drop in his company’s share price that led the broader market to make the trip

Related: What will drive the likely 2024 crypto bull run?

In response to the economic slowdown, FedEx said it planned to take steps, including closing 90 locations by the end of the year. The good news: Americans are so saddled with debt that it’s unlikely they were planning to visit any of these places anyway. Consumer debt reached $16.15 trillion in the second quarter of 2022, a new record, the Federal Reserve Bank of New York noted in an August report. The figure comes to just over $48,000 for every man, woman and child in the United States, $330 million in all.

Total consumer debt of Americans. Source: FRBNY/Equifax Consumer Credit Panel

With a national median income of $31,000, this equates to an average debt-to-income ratio of 154%. If you want to factor in a little more than $30 trillion in federal government debt, you can add another $93,000 per person, for a total of $141,000 and a debt-to-income ratio of 454%. (Obviously, the numbers get worse when you consider the fact that only 133 million Americans held full-time jobs in August.)

While policymakers might be indifferent to public debt, they are more concerned about consumer debt. “I’m telling the American people that we’re going to get inflation under control,” President Joe Biden said Sunday in an interview with CBS, prompting observers to wonder if he was trying to preempt the announcement of ‘this week from the Federal Reserve of enormous potential. , raising the federal interest rate by 100 basis points. Such a move could send the markets into a tailspin from which they would not recover for some time.

Ironically, even this move might not be enough to control inflation in the short term. Given the rapid rise in debt, it is perhaps not surprising that inflation, just over 8% year-on-year in August, has shown little sign of abating. Americans may not have much money left, but overall, that reality hasn’t dampened demand. If the New York Fed report was any indicator, the cash backing this demand is coming from credit. The bank noted that credit card debt experienced the largest year-over-year percentage increase in more than 20 years in the second quarter.

Related: What will the cryptocurrency market look like in 2027? Here are 5 predictions

There lies the rub. No matter how quickly the feds move to discourage debt, it’s unclear when asset prices will rise. High levels of debt—which already exist—mean less money to buy things. Raising the cost of debt service, as the Federal Reserve is trying to do, means less money to buy things. Forcing Americans into a state of economic ruin to cut costs means less money to buy things. Not controlling inflation and allowing the cost of basic goods and services to continue to rise—exacerbated, of course, by an energy crisis in Europe over which financial managers have little control—means less money to buy anything else.

Perhaps that perspective is the same one Elon Musk came to when he said in June that he had a “super bad feeling” about the economy. Other observers have issued even darker takes, including the famous debt aversion Rich dad, poor dad author Robert Kiyosaki. “The biggest bubble bust is coming,” Kiyosaki wrote on Twitter in April. “Baby Boomer Retirements Will Be Stolen. Spending $10 Trillion on Fake Money Ends. Government, Wall Street & Fed Are Thieves. Hyper-Inflation Depression Here. Buy Gold, Silver, Bitcoin Before Coyote wake up.”

It is true that Kiyosaki’s assessment is partially at odds with the results that pessimists might expect. The economic calamity should lead to a decline in asset prices across the board, including the prices of gold, silver and Bitcoin. A more optimistic forecaster might expect Americans to learn from their mistakes, use the next year to pay down their debts, and resume spending big in 2024 while avoiding a hyperinflationary depression.

In either scenario, one thing seems relatively certain: Neither crypto nor any other asset class is on the verge of a record rally. If you want to thrive investing in the coming year, you’d better start learning how to buy short options from less market-savvy optimists.

Rudy Takala is Cointelegraph’s opinion editor. He previously worked as an editor or reporter at newsrooms including Fox News, The Hill and the Washington Examiner. He has a master’s degree in political communication from American University in Washington, DC.

This article is for general information purposes and is not intended and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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