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

Global markets are going through a difficult time – including the cryptocurrency market. But judging by the talks from the peanut gallery, it appears some observers didn’t get the memo.

“Feel relatively safe during halftime,” Twitter’s “CryptoKaleo” — also known simply as “Kaleo” — wrote in a Sept. 12 tweet to his 535,000 followers, referring to the November midterm elections in the United States. The prediction was accompanied by a chart showing his belief that the price of Bitcoin (BTC) would surge to $34,000 before year-end – a 50% increase from its level of around $20,000 last week.

“Of course we can bleed less,” says pseudonymous Twitter mega-influencer Pentoshi wrote in a letter dated September 9 to his 611,000 followers. “But the market at this value is far more attractive than it has been in over a year. […] Grabbed some $BTC yesterday / no alternatives but will nibble.”

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

It’s good to see the optimism running rampant, even if it’s mostly among influencers looking for engagement and paying customers. Unfortunately, macro headwinds suggest the reality is a bit darker — maybe a lot darker.

FedEx last week underscored the possibility that economic conditions could deteriorate by announcing it was $500 million short of its first-quarter revenue target. “These numbers – they don’t bode well,” CEO Raj Subramaniam wryly observed in an interview with CNBC. His comments, which included a prediction that the numbers marked the beginning of a global recession, sparked a 21% plunge in his company’s share price by the end of the week, taking the broader market with it.

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Related: What Will Drive Crypto’s Likely 2024 Bull Run?

In response to the economic slowdown, FedEx planned to take action, including closing 90 locations by the end of the year. The good news: Americans are so heavily in debt that it’s unlikely they planned to visit any of these places anyway. Consumer debt hit $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 number comes to just over $48,000 for every man, woman and child in the United States — 330 million in all.

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

With a national median income of $31,000, that equates to an average debt-to-income ratio of 154%. If you want to account for just over $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%. (The numbers obviously get worse when you consider that just 133 million Americans were in full-time employment in August.)

While policymakers might be lax about government 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 in a CBS interview on Sunday, prompting observers to question whether he was attempting to back the Federal Reserve’s announcement this week of a potentially huge one To forestall inflation, 100 basis point interest rate hike in the federal interest rate. Such a move would likely send markets into a tailspin from which they would not recover for some time.

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Ironically, even this move may not be enough to tame inflation in the short term. Given the rapid rise in debt, it’s perhaps no surprise that inflation – which rose a little over 8% year-on-year in August – shows little sign of slowing down. Americans may not have much money left, but by and large, this reality hasn’t dampened demand. If the New York Fed report was any indicator, the cash backing of this demand comes from credit. The bank noted that credit card debt experienced its 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

Therein lies the catch. No matter how fast the Feds move to discourage debt, it’s not clear when asset prices will rise. High debt – which already exists – means less money to buy things. Raising the cost of servicing debt, like 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. If inflation isn’t kept under control and the cost of basic goods and services continues to rise – exacerbated, of course, by an energy crisis in Europe, over which finance managers have little control – that means less money to buy other things.

Perhaps that outlook is the same as that reached by Elon Musk when he said in June he had a “super bad feeling” about the economy. Other observers have expressed even more somber views, including those notoriously debt-shy Rich father, poor father Author Robert Kiyosaki. “Biggest bubble bust is coming,” Kiyosaki wrote on Twitter in April. “Baby boomer pensions are about to be stolen. $10 trillion in counterfeit spending. Government, Wall Street and the Fed are thieves. hyperinflation depression here. Buy gold, silver, bitcoin before the coyote wakes up.”

Admittedly, Kiyosaki’s assessment is partially at odds with the results that pessimists might expect. The economic catastrophe should lead to falling asset prices across the board – including gold, silver and bitcoin prices. A more optimistic forecaster might hope that Americans learn from their mistakes, use next year to pay down their debt, and start spending big again in 2024 — while avoiding a hyperinflationary depression.

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

Rudy Takala is Opinion Editor at Cointelegraph. He previously worked as an editor or reporter on newsrooms such as Fox News, The Hill and the Washington Examiner. He holds a master’s degree in Political Communications from American University in Washington, DC.

This article is for general informational purposes and should not be construed 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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