Is a great financial crisis coming or years of economic prosperity? There are conflicting signals.
Within this chaos, bitcoin is presented with a unique opportunity.
The world economy gives ambiguous signals. At the same time that the S&P500 index is approaching all-time highs, gold is rising in price as if recession were inevitable. Simultaneously, Chinese stocks that were collapsing make a sudden jump and shoot towards yearly highs. Bitcoin is trading in fear, falling in price. And, as if all this were not enough, the war conflict in the Middle East is escalating to new heights and there are already those who dare to speak of “World War III.”
For the analysts of the financial newsletter ‘The Kobeissi Letter’, the diagnosis It is clear: what is observed isAccording to them, “the epitome of a broken market”.
The team of specialists led by Adam Kobeissi detects six signs that leave this diagnosis beyond doubt.
First of all, they mention the fact that “stocks are rising as if we have avoided a recession”. And many believe so. CriptoNoticias reported that, in a report published by the bitcoin (BTC) and cryptocurrency exchange, Coinbase, it is said that “the risk of recession [en Estados Unidos] It’s low.”
As can be seen in the following graph of TradingViewthe S&P500, which encompasses the 500 most valuable companies in the United States, marked a new all-time high this week:
As a second point in favor of its thesis, Kobeissi’s financial team assures that “gold prices are rising as if we are heading towards a recession”.
Keep in mind that gold is, traditionally, a safe haven asset and store of value. In times of recession, global crisis or financial chaos, its price tends to rise, as investors go there in search of protection for their capital.
At the time of this publication, gold is trading at over $2,600 per ounce and has set several all-time highs so far in 2024.
Thirdly, it is indicated that «oil prices are rising as if we are heading towards World War III».
The price of oil often rises in war situations due to uncertainty about global energy supply and demand. War conflicts, especially in key regions for oil production or transportation, such as the Middle East, raise concerns about possible supply disruptions.
Markets anticipate that crude oil flows could be affected by damage to infrastructure, economic sanctions, or restrictions on international trade routes. This uncertainty leads investors to speculate upward, boosting the price of oil as a preventive measure against possible shortages and imbalances in the energy market. Furthermore, energy demand tends to remain high during conflict situations, reinforcing upward pressure on the price.
In the current context, it is necessary to know that the president of the United States, Joe Biden, said this Thursday that he is talking with his Israeli counterparts about the possibility of attacking Iranian oil facilities.
It is worth clarifying that, although it is true that the price of oil has risen in the last week, it is still relatively cheap, as can be seen in the following graph, which shows its price since 2020:
The specialists explain:
“Although oil prices have risen over the last week due to war concerns, they should be MUCH higher. If we really are on the path to a ‘soft landing’ and wars are breaking out, why aren’t oil prices above $100? “Markets are pricing in a drop in demand and supply is everywhere.”
The Kobeissi Letter, financial analysis newsletter.
As if the ambiguous signals were few, ‘The Kobeissi Letter’ points out, as the fourth indicator analyzed, that “bond prices are falling”.
How is this possible? The report does not provide explanations, but there are several reasons that may explain this behavior. For example, if investors expect inflation to rise, then they may start selling bonds because declines in interest rates make investing in bonds less attractive. Also, there may be distrust in government debt (this, despite the fact that US Treasury bonds are considered “the safest investment in the world”).
The following chart shows the price of Treasury note futures. They show how investors anticipate changes in interest rates, which can be an indicator of economic trends and market reactions to economic policies and other macroeconomic events.
Fifth, Kobeissi points out:
Cryptocurrencies are falling as if risk appetite has disappeared.
The Kobeissi Letter, financial analysis newsletter.
Although bitcoin is considered by its defenders (among which CriptoNoticias is) as the best money in the world and as a reserve asset of value, the truth is that the market – in general – perceives it as a “risk” asset. due to its volatility.
For this reason, when the scenario becomes hostile, there are wars, rumors of wars, or the macroeconomic context shows signs that it will become adverse, many tend to flee from bitcoin and other assets considered “risky” to take refuge in assets traditionally considered safe, for example, gold.
It is worth clarifying that not everyone has this behavior. There are exceptions. In the current context, many large investors are taking advantage of cheap prices to accumulate more BTC.
But, as a final contradiction, ‘The Kobeissi Letter’ shows that “Tech stocks rise as if risk appetite is at all-time highs”.
And then?! Is World War III about to start? Or are years of love and happiness coming for the world?
Bitcoin can shine in a “broken market”
In the context of financial markets, talking about a “broken market” means that traditional signals that guide investors appear to be in conflictblurring the line between what should generate optimism and what should cause alarm.
Analysts often expect certain economic behaviors to be consistent: when a recession is perceived, the price of safe-haven assets like gold rises, while stocks fall and bonds often act as a safe haven. However, in recent months, the signs have been anything but clear. This disconnection between expectations and reality generates uncertainty and confusion.
This mix of conflicting signals raises an important question: Are investors underestimating the real risk of a global recession or a major war? The complacency created by years of economic stimulus may be leading markets to ignore looming dangers. However, not all analysts agree that the market is completely broken. Some maintain that this is just a period of adjustment and that eventually everything will return to normal.
Within this chaos, bitcoin has a unique opportunity. Despite being perceived as a risk asset by much of the market, its nature as a decentralized asset and its inherent scarcity position it to shine in times of crisis. As investors look for alternatives to the potential loss of value in fiat currencies and traditional assets, bitcoin could become an increasingly attractive option, particularly if financial markets continue to show signs of being “broken.”
Bitcoin shares many characteristics with gold, especially its ability to act as a haven in times of uncertainty. However, unlike gold, bitcoin has much greater liquidity, accessibility, and “portability,” making it a viable option not only for large investors, but also for small savers looking to protect their capital in difficult times.
The challenge for bitcoin is to overcome the perception of being simply a speculative asset. As global events continue to challenge economic norms and markets continue to fail to behave in predictable ways, bitcoin—whose monetary policy is predictable and immutable—has the potential to emerge as a new digital store of value.
Ultimately, if bitcoin manages to capture the market’s attention like gold has in times of crisis, Its brilliance can overshadow other more traditional investments. As long as the market remains broken, bitcoin will have the opportunity to demonstrate that it is more than just a risk asset, and that in the midst of chaos, it can be the refuge that many were unknowingly seeking.