So, we’re technically in a recession… but markets are going up? (What Gives?)
Alright it’s that time again!
It’s our bi-weekly(ish) check in with the crypto markets.
So the total value of U.S. goods and services (aka GDP) has shrunk consecutively over the past two quarters (6 months).
Which is the literal definition of a recession.
...but over the past 30 days, Bitcoin is up 19%, Ethereum is up 60% and there’s a whole lot of green in the markets.
As always, the future is unknown and this could be short lived…
But for now, hoooray(?)
Here’s our guess as to how this weird market reaction came to be:
The Federal Reserve, the folks who are responsible for getting inflation rates (aka ‘why is everything so expensive all of sudden’ rates) under control, may be turning from hawkish, to dovish.
What is this bird related terminology, you ask?
Hawkish = the tightening of purse strings.
E.g. ‘Something is wrong in our economy, we need to fix it by reducing money supply through high interest rates.'
Dovish = the loosening of purse strings.
E.g. ‘You know what, the worst may be behind us, we might ease these rate hikes and make money more available.’
To be completely straight with you, this shift in outlook wasn't outrightly stated (the financial worlds are rarely black & white).
But many investors are taking it upon themselves to read between the lines, after the fed hinted that, while more hikes are likely to come - they might not be so severe.
Which, if true, means the cost of borrowing money should level out.
And level interest rates, means more market certainty (which investors LOVE).
When folks feel vaguely certain about what kind of interest payments they’ll be expected to fork out on their loans in the long term...
The more likely they are to borrow → the more likely they are to spend money (on many things, including crypto).
As a result - investors have loosened their purse strings and started buying crypto again, hoping to scoop coins up while the price is low.
As always, nothing is certain and sentiment could change tomorrow.
But for now, we'll take it!
