Winter is fast approaching and investors are fascinated by what could happen next. After all, the energy shortage of the past few months has driven prices up massively. Is the world facing an unprecedented recession and what impact could this have on cryptocurrency prices?
The last 12 months in the financial markets look like a losing defensive battle. The money printing of the last few years combined with the effects of the pandemic caused the devaluation to fall. Even before the outbreak of war in Ukraine, inflation was running at 5%, a record not seen for many years.
Is the global economy on the brink?
The explosion in the prices of electricity, gas and oil was only the latest boost that finally tipped the already existing sloping level. The role played by central banks is the most surprising.
At first, they saw no inflation on the horizon. When this could no longer be denied, it was declared a temporary phenomenon of the pandemic which would quickly pass. After that, the war in Ukraine was singled out as the sole culprit, only to announce massive countermeasures.
poorly assessed risks
But the train towards recession seems to have already started. Even the US Federal Reserve is coming too late with significantly tougher measures than the European ECB. Even if a certain optimism has recently been announced among investors, it seems courageous in view of the situation.
Market strategists like Hedgeeye Risk Management CEO Keith McCullough believe the Fed underestimated inflation and is now also wrong about recession risk. He sees the central bank as a lost cause when it comes to crossing the line between stability and recession and advises investors to pray above all else. He sees the border already crossed and sees the next global economic crisis right at his doorstep.
This time it affects everyone
In his opinion, it will be very different from the last one in 2008. At that time, it was above all the States and the financial sector that were affected, this time it affected the middle of the population. If interest rates continue to rise, bad debt threatens to seriously hurt not only borrowers but also banks. At the same time, the interest burden puts pressure on consumer spending and therefore on corporate profitability. This puts jobs at risk in large numbers.
McCullough sees a deep recession and no reason to be optimistic. He was also reluctant to hope for growth and cryptocurrencies. He sees it as a big risk. The market seemed to follow its forecast over the past few months. For example, the price of Bitcoin has been hovering around the $20,000 mark for about four months without really making any lasting profits.
crypto fights
In this market environment, all digital assets are struggling. This applies to new cryptocurrencies as well as established cryptocurrencies. Even actions announced with a lot of media noise, such as Ethereum’s “The Merge”, have no effect on prices. For many investors, this raises the question of which cryptocurrencies to buy?
The recently announced oil production cut by OPEC amid an energy crisis could mean the final push into a global recession. German Economy Minister Robert Habeck recently announced that he expects a slight economic slowdown in 2023, but that might be too optimistic.
After all, no one knows what will happen when the currently stored gas supplies run out in winter and the supply from Russia finally stops. Therefore, the following applies not only to the coming months, but also to the next investment: dress warmly!
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