With no signs of an easing of the Covid-19 crisis in the United States, central banks around the world have deployed financial airbags in the form of quantitative easing, and they plan to do more. Modern money theory has taken center stage, and we see it in action. This is a scene that will overwhelm you: for example, watching the economic version of the first nuclear explosion at Los Alamos and the Manhattan Project.
What is happening to the global economy is unparalleled. We are entering completely new and unknown territories, and all games go beyond when it comes to inflation / deflation. How will different asset classes respond to the incentive? Will we see rising prices, price stability, or chaos? No one knows. One thing is for sure: the absurd will surely come, and you need to watch and follow closely.
QE 2020 vs QE 2008
In 2008, the printed QE money was not sold – it remained in the Federal Reserve’s lease account to member banks in the form of computer reporting. It was simply not knowing how economic flows would work, although the net effect was positive: Bitcoin (BTC) was born as a reaction to quantitative easing.
Today, however, quantitative easing is another beast: it is supposed to be directed to homes and small businesses to pay for food and rent, or simply to prevent hunger, mass homelessness, social unrest and social disaster. What we have seen is the end of nineteenth century industrial capitalism and the dominance of money capitalism. This has been true since the end of the Bretton Woods Agreement 50 years ago, but it was not entirely clear to everyone. Humanitarian Aim: Avoid death, suffering and social upheaval. This new money in circulation simultaneously – no doubt – flowed directly into the bank accounts of households and small businesses as deposits entered by the Federal Reserve System, and inadvertently made its way into the financial markets. The result: a massive stock market boom that amazed some and surprised sociopathic card sellers.
Don’t play against the Fed. This will lead to a quick, unattractive and exploitative death. While Robinhood traders are generally thought to be behind market groups, the truth is that operators directly linked to the Fed are buying most of the behind the scenes buying everything from bonds to index funds and individual stocks, and soon cryptocurrencies.
What does this mean for cryptocurrencies?
Ironically, cryptocurrencies are uniquely geared towards understanding what’s going on with the current monetary system and market deceptions – everything is found in regular order books. Cryptos has no real economy to support it – it has no internal cash flows. Their main offerings of economic value are: (1) speculation; (2) Drugs and tax evasion; And (3) alternative securities outside the traditional banking system.
In short, these are active financial instruments. Equities are increasingly unrelated to fundamental economic value and depend solely on the dynamics of supply and demand in financial markets without economic support. The economy is crumbling, but stocks are growing – this is not a paradox, but a job: this is exactly what happens to cryptocurrencies.
The contrast between zero cash flow and infinite valuation is perception. Effective support is essential. Overall, cryptocurrencies have survived as an investment grade even with minimal asset security, or perhaps! — As. Since cryptocurrencies are not directly related to the health of the economy, their movement is largely independent of the economy. They have proven themselves well as a valuable asset, consolidating Mars’ losses, and it looks like they could collapse in the future. This is the logic of pure supply and demand – the psychology of a number of financial assets (limited supply of only 21 million BTC) and an endless wall of liquidity that haunts them. What you are seeing is an influx of financial and monetary demand, not economic demand from the demand side in the order books of market makers, both in stock markets and cryptocurrencies.
Forget basics, stories, and traditional assessment methods. Stocks are now like cryptocurrencies: a store of value that only exists in the traditional economy and the stock markets. The value of a person is determined by the fact that someone is willing to pay for it. Notice the new money flow and the technical depth of the order book ahead of it. The liquidity wall is huge, but the order book pales in comparison.
The most important way to assess the value of a stock is not through economic value, but through stock exchanges and technical cornerstones for marketing robots. The value of a share is determined by the fact that someone is willing to pay for it, as is the case with cryptocurrency.