Source: Blockchain Blue Ocean
I haven’t updated an article for a long time. The content output this year is still relatively slack. Long articles are rarely updated, and most of them are updated on social platforms. Short view.
The recent market trend has been very strong, thanks to the market’s expectations that the Federal Reserve will stop raising interest rates and cut interest rates in the future. The US stocks Nasdaq and The Dow Jones has broken through all-time highs, and the S&P has also hit all-time highs. The encryption market has experienced a magnificent surge.
Many people are now concerned about nothing more than whether the bull market is coming, or what stage the market is currently at? Some people who thought it was a bear market wanted to wait for a big drop but did not dare to get on the bus, but the market did not pull back all the way. Those who were on the bus were also confused as to whether they should leave the market.
First of all, I think that as far as the encryption market is concerned, there is no doubt that it is already a bull market. Even looking back, the end of last year was already the end of the bear market. The currency value of a large number of projects fell by more than 90%, several leading institutions and platforms went bankrupt, and the liquidation of long leverage was completed.
The perception of market participants is always hindsight. For most of this year, most speculators are still hesitating about a rebound in a bear market. We have already entered a bull market. Unknowingly, one year has passed, and Bitcoin has rebounded by more than 200% from the bottom, and some strong varieties have even experienced exaggerated increases.
Looking back, this year’s good market situation is composed of several factors:
1. The interest rate hike cycle is over. Since the beginning of this year, it has been emphasized many times in sharing that the Fed's strong interest rate hikes have ended. This year, more interest rates have been raised to restrictive areas and maintained. , in order to achieve the purpose of fighting inflation. The current interest rate hike has been completely announced and the market is beginning to expect an interest rate cut. The direction of monetary policy will be analyzed in detail later.
2. In the bear market, for the liquidation of long leverage, everything that should be liquidated is liquidated, and when the market is desperate, investors "lay flat" ", there is not so much game in handicap, and it is easier to pull it off.
3. Expectations for Bitcoin ETFs. BlackRock and other institutions have applied for Bitcoin ETFs, but the current market is almost certain that ETFs will be announced. will pass.
4. Hot topics such as MEME and inscriptions, and the hundreds-fold wealth creation effect in the early stage brought FOMO emotions to the market.
1 runs throughout, 2 created the copycat Mavericks in the first half of the year, and 3 and 4 brought about the second half of the year from October to the present. Hot quotes.
Which stage is it?
Looking back at the process of the last bull market cycle, the Federal Reserve began to turn around at the end of 2018, and the interest rate hike cycle ended. In 2019, there were hot topics such as CX and IEO, and the market experienced a big rebound. In 2020, due to the black swan caused by the epidemic, the Federal Reserve directly stepped in and shortened the process of slowly cutting interest rates. This in turn led to a rapid bullish movement in the risk market, and the crypto market also benefited from capital spillovers and embarked on a vigorous bull market. It was not until the end of 21 that the Federal Reserve announced that it was about to raise interest rates due to inflation, and the bull market ended.
Many people believe that the last bull market started in the second half of 2020. In fact, it started in 2019, and the time node was the Federal Reserve raising interest rates. End of cycle. We all say that bulls are short and bears are long. In fact, the bull market lasted for three years from 2019 to the end of 21. However, many people did not feel it in the early stages of the bull market, and thought that 2019 was a rebound of the bear market in 2018. It is so similar to now. ?
To compare with "carving a boat and seeking a sword", we can think that the current situation is similar to that of 2019, which is the early stage of the bull market, and is currently transitioning to the middle stage of the bull market. stage.
“The bull market does not mean that it only goes up but not down. Even the last round of bull market had many times with more than 20% drop, and even There are also extreme market conditions like 3.12 and 5.19. When the market is unanimously optimistic, risks often come."
Finance Market speculation is based on expectations. Judging from historical experience, the market will usually have a very good growth after stopping raising interest rates. This is also the basis for the entire market this year as I mentioned earlier. For example, before the subprime mortgage crisis in 2008, U.S. stocks even continued to short squeeze and hit new highs. But by the time the Fed starts cutting interest rates, there is usually something wrong with the economy, such as a recession, financial crisis, etc.
This is because the Fed is not like speculators like us who often predict the transaction in advance. Only then will things change, which is why everyone jokingly calls the Fed "driving with its eyes in the rearview mirror."
A recession may be here
Why do I think a recession may be here?
The Fed's interest rate meeting and Powell's speech a few days ago showed a sharp turn from last month. This is in line with what has been emphasized in many previous speeches. "higher for longer" is quite different. Not only did they continue to maintain their stance on not raising interest rates, they even expressed concerns about the impact of raising interest rates on the economy in their speeches.
I think there are four possibilities for the Fed’s major turn:
1. The Federal Reserve may have obtained some data. The deterioration of the U.S. economy is much more serious than the market expected, and the Federal Reserve has no choice but to pivot quickly to avoid a serious recession. However, these data are not publicly disclosed.
2. Debt problem. Since the disintegration of the Bretton Woods system, modern economic development has been driven by currency debt. In the past two years, Under the influence of interest rate hikes, the debt problem has reached its peak, as can be seen from the current situation of U.S. debt.
3. In the U.S. election next year, the Federal Reserve needs to provide society with a relatively loose monetary and financial environment to ease social pressure. win higher support for the authorities. Although the Federal Reserve has considerable independence, it also needs to "play politics" when necessary.
4. Powell hopes to follow the example of legendary Federal Reserve Chairman Greenspan and preventively cut interest rates in advance to avoid excessive interest rate increases that may have a serious impact on the economy. .
This is not a single-choice question. What prompted the Federal Reserve to make such an obvious adjustment must be the influence and game of many factors, including ours. Don't know the reason. Judging from the current economic situation in the United States, I think 1 and 2 may be more likely. If it is only 3 and 4, the Fed will not make such a rapid change in one month.
Based on the current global economic situation and complex geopolitical conflicts, as well as some debt, trade, employment, inflation, and unemployment data of various countries, A recession may be coming, or may even have already occurred.
It’s just that investors don’t know it yet. They are blinded by the soaring stock index and optimistic expectations for a soft landing, and the market sentiment is changing. Like a pendulum, always swinging between optimism and pessimism, everyone is easily affected.
(As for "how bad is the macro situation", I will not list the data in detail here. Because it involves many economic and political topics , without financial qualifications, it is easy to trigger keywords and cause the article to be deleted. It has been deleted twice this year.)
If a crisis comes, how to deal with it?
Currently in the period before the end of interest rate hikes and the start of interest rate cuts, risk markets are performing well. My personal judgment is that by the Q1 next year, as interest rates remain at restrictive interest rates for nearly a year, regardless of whether interest rates are cut or not, the impact of interest rate increases on the economy will deepen and explode.
Just as it takes time for interest rates to be transmitted to all aspects of society, it does not mean that society will immediately have money if the Fed starts cutting interest rates in advance. This chain It also takes time to conduct.
We need to pay close attention to external signals in the Q1 and Q2 quarters of next year, that is, whether there are problems in the real estate/banking industry in the United States, or whether some major Economic crises and national debt defaults have occurred. For example, an incident like this happened at Silicon Valley Bank earlier this year. Once something similar happens, you must do a good job in risk control of risky assets.
No one can be 100% sure when the crisis will come. If it does not come, everyone will be happy, but if the crisis comes, how should we respond and how should we deal with it?
Bonds: During the recession stage, as interest rates decrease, bond yields fall, and bond prices rise. Therefore, allocating bonds is a good choice, especially U.S. bonds. Although it is said that U.S. bonds have the risk of thunderstorms, they are still the safest fixed-income assets. If there is a problem with the U.S. debt, it will trigger a global economic and financial tsunami. At that time, you will not be able to avoid risks by holding any other assets. There is no need to be overly worried now. There are certain thresholds for buying U.S. bonds. If you don’t have the ability, it’s okay to buy our national bonds. Don’t buy junk bonds.
Gold: Antiques in prosperous times and gold in troubled times. This is not a big problem. Gold on the whole maintains its value. If It is good to have idle funds for long-term allocation. But looking back at the trend of gold over the past few decades, there have been many times when gold has linked up with the decline in U.S. stocks after recessions. If you really regard gold as a "hedging tool", I'm afraid you will be disappointed.
Stock market:In the early stages of a recession, equity assets held will plummet. If we are really sure that a recession is coming, we should reduce our positions and wait for bottom signals instead of constantly covering our positions.
Cryptocurrency:No one talks about Bitcoin as digital gold anymore. Bitcoin cannot be a safe haven. Compared with US stocks, it has greater room for growth, greater volatility, higher returns and risks. And altcoins are more dangerous when a recession comes, so don't have too much faith in altcoins. Although it may rise several times or more than ten times at every turn, and it may fall by 90% or fall by another 90%, it may only take less than a year for the project side to go bankrupt and disbanded. I think many people experienced it last year.
At the beginning of next year, market participants should gradually reduce their risk appetite and reduce their holdings of financial equity assets (stocks, cryptocurrency etc.), appropriately increase the cash assets in hand. This prevents the asset value from diminishing when a crisis comes, and also allows you to keep some extra cash when a crisis arises.
Finally, there is an old saying that "One step ahead is a pioneer, two steps ahead is a martyr". If the interest rate cut occurs before the crisis, it is very likely that short squeezes will continue because the risk market is sensitive to policy. Therefore, even if we think that recession and crisis are inevitable, we should not rush to clear positions or go short. Because the market is still strong at present, you must wait for the signal to come out before making a decision, and don't be too far ahead of the market.
Follow the cycle and do the right thing at the right time. This may also be the last big opportunity for ordinary participants.
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