Summary

The article discusses the potential for a significant downturn in the cryptocurrency market, exacerbated by the Omicron variant and impending interest rate hikes by the Federal Reserve, while also speculating on future developments that could trigger a crypto rally.

Abstract

The author of the article argues that the current state of the cryptocurrency market, characterized by inflated asset prices, is reminiscent of an 'everything bubble' that is ripe for a correction. With Bitcoin and Ethereum experiencing unprecedented gains, the market is seen as vulnerable to a 'Black Swan' event, such as the rapid spread of the Omicron variant, which has already impacted economies globally. The Federal Reserve's plan to raise interest rates to combat inflation is expected to negatively affect asset prices, including cryptocurrencies. Despite these challenges, the author suggests that there is hope for a crypto market rebound, potentially driven by institutional investment following significant updates in cryptocurrency infrastructure, such as Ethereum 2.0, and the adoption of Bitcoin by more countries.

Opinions

Cryptocurrency is seen as a core component of the 'everything bubble,' with its high risk and limited practical use making it susceptible to being the first asset class to be sold off in an economic downturn.
The Omicron variant's widespread impact, including labor strikes and hospital overloads, could be the unexpected event that triggers a market crash

The Real Crypto Black Swan Event is Coming Now

This is it, the top of the everything bubble

The markets are completely overpriced and have been for years; we don’t call it the ‘everything bubble’ for shits and giggles.

Cryptocurrency is the worm at the core of this everything bubble.

While top-performing cryptocurrencies like Bitcoin and Ethereum have value, they’re mostly useless in everyday life.

Who am I kidding? They’re completely useless for most people.

It doesn’t help that crypto is coming off the biggest bull run in human history, indicating that we’re in for a reckoning. A perfect storm:

BTC went from $5,200 to $63,000 in 12 months (+1200%)
ETH went from $90 to $5000 in 18 months (+5455%)
The total Crypto Market Cap went from $100,000,000,000 to $3,000,000,000,000 (+3000%)

The first assets that get sold in an economic downturn are assets of surplus or high risk. Crypto is both.

All it takes is one major Black Swan event (i.e. something completely unexpected) to topple this entire house of cards. Let’s go over what socio-economic problems could do just that.

Omicron is destroying things

The girl I’m dating right now just got Omicron. Make that her and everyone else on planet Earth.

You used to have to cough to cover a fart and now you have to fart to cover a cough.

Back in 2020, that first wave of COVID-19 became the Black Swan event to kill the longest-running bull market in human history. Now it’s looking like Omicron might do the same.

Earlier this week President Biden had to deploy squads of military medical personnel to overwhelmed hospitals in New York, New Jersey, Ohio, Rhode Island, Michigan and New Mexico.

To make matters worse people en masse are resigning from work due to COVID concerns or a general disgust for their job environment. The CDC reported that a nationwide labor strike of +8 days will be an economic catastrophe.

Employees from Starbucks, Krogers and local garbage men are all on strike until further notice. It’s not looking good.

Here’s the Good News!

Omicron is the common cold variant of coronaviruses. It’s not very deadly, especially when compared to past variants.

Bill Gates himself even said, “Once the omicron variant passes, Covid will be more like the seasonal flu.”

The hope is that Omicron is spreading so rapidly that it burns itself out.

Cases have already peaked in the U.K.

I think we’ll be fine. Maybe.

The Fed is crashing the market right now

Inflation has hit its hottest rate since 1982.

But there’s a bigger problem for investors. Interest rates. Interest rates are about to go up and will almost certainly take asset prices down with them.

This is because high-interest rates will cost banks more to borrow and lend to each other, which ultimately networks down to us as investors.

The Fed believes it’s time to tighten monetary policy in order to tame food, energy, and transportation inflation at the cost of financial asset prices.

“If we see inflation persisting at high levels longer than expected, if we have to raise interest rates more over time, we will,” Federal Reserve chairman Jerome Powell said in a press conference.

Take a hint. The rich like Elon Musk, Jeff Bezos, and Chamath Palihapitiya have all been dumping stocks and crypto at our current prices.

The Fed has no obligation to keep your crypto pumped.

Here’s the Good News!

When the Fed raised rates from zero back in 2015 stocks went to all-time highs the very next year. Granted, back in 2015 we didn’t print one-fourth of the total money ever created or have a broken supply chain.

But let’s stay positive right now. Happy thoughts.

In 2021 Japan tried raising interest rates, after going negative, and quickly had to backtrack because economic growth grinded to a snail’s pace.

The Federal Reserve may run into a similar problem. It’ll look a little something like this —

-Fed raises rates to 1% -Entire economy looks to collapse -Drops it immediately again

Retail investors are prepared to call the Fed’s bluff if they raise interest rates. If the Fed isn’t bluffing, however, it could be a bloodbath for asset prices.

Once again, I think we’ll be fine. Maybe.

This event will trigger another crypto rally

There’s been what — two green months in the last nine for Bitcoin?

We’re already in crypto winter. Brace yourselves.

Two things get us out. Actually, only one, but in two different ways. Institutional investors. Institutions will save crypto.

I know I’m not reinventing the wheel here, but I believe a second country adopting Bitcoin would definitely unleash FOMO on institutional investors.

Either that or we’re going to need the developers to come through with the upcoming wave of cryptocurrency updates. In case you’re not in the loop, here’s what coming down the pipeline for 2022 —

Ethereum 2.0
Solana’s official mainnet will release(Solana’s still in beta)
There are going to be three Cardano hardforks in February, June and October; and hopefully, we’ll finally see smart contracts!
And we might also see a spot Bitcoin ETF

Devs have to deliver this year. That’s for sure.

Final Thoughts

Bitcoin is essentially a Black Swan event.

It was completely unpredictable. No Wall Street investor could have predicted that Bitcoin would become any more successful than Chuck E. Cheese tokens or even rise above one penny.

In fact, the original source code for Bitcoin included online poker and marketplace sketches, indicating that even the creator himself couldn’t have predicted the unbelievable $3 Trillion market cap we see today.

That said, Bitcoin is becoming the most powerful secure bank in the world.

Expect the market cap to be back in the trillions by summertime.

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Ever since I was a child it was my dream to become a financial advisor. Unfortunately, it never came true. Therefore I am not a financial advisor and you should do your own research and not just listen to random people on the internet. Nothing contained in this publication should be construed as investment advice.