Summary

The article argues that cryptocurrencies, including Bitcoin, are at risk of significant devaluation during an impending economic recession, due to their lack of intrinsic value and inability to generate income, and suggests that investors should consider selling their crypto assets.

Abstract

The author of the article expresses a dire warning to cryptocurrency investors, suggesting that the economic landscape is poised for a severe downturn reminiscent of the 2008 financial crisis. The article posits that cryptocurrencies, often seen as speculative assets without tangible value, are particularly vulnerable in such an environment. With the Federal Reserve's aggressive stance on inflation potentially leading to a recession, the author predicts that the value of cryptocurrencies could plummet, using the example of Bitcoin's 73% drop as evidence of its volatility and questioning its role as an inflation hedge. The piece also touches on the broader economic challenges, including geopolitical conflicts, supply chain disruptions, energy crises, and a slowing Chinese economy, which collectively contribute to an unfavorable outlook for crypto assets. The author concludes with a forecast that Bitcoin could fall to the $12,000 level or even revisit its COVID-era low of$ 5,000, advising readers to sell their crypto holdings in anticipation of further market deterioration.

Opinions

Cryptocurrencies are likened to "manufactured assets with no real value" that could be "absolutely destroyed" in an upcoming recession.
The Federal Reserve's commitment to combating inflation, even at the cost of economic downturn, is seen as a precursor to a recession that will negatively impact cryptocurrencies.
The author draws parallels between the current state of the crypto market and the Dot Com bubble, warning that many crypto assets could go to zero as the market corrects.
Bitcoin is criticized for not living up to its promise as an inflation hedge, given its significant drop in value despite high inflation rates.
The collapse of prominent cryptocurrencies and exchanges (e.g., Luna and FTX) is seen as undermining investor confidence in the crypto market.
The author predicts that Bitcoin could experience a substantial decline, potentially falling to the $12,000 level or even lower to its previous low of$ 5,000 during the COVID pandemic.
The article suggests that during tough economic times, people are likely to abandon "algorithm-based boutique assets" like cryptocurrencies in favor of assets with intrinsic value.

Why you should sell your crypto immediately

As we approach what could be a catastrophic recession in 2023, manufactured assets with no real value stand to get absolutely destroyed.

That’s how I look at cryptocurrencies as we approach what will be an extremely challenging economic time.

For younger people who didn’t live through the 2008 crash, it might be their first time experiencing a long-term, crushing recession.

Jerome Powell and his Federal Reserve colleagues are overwhelmingly determined to tame inflation, even if they need to burn down the economy to do so.

And burn it down they will!

You see, it takes some time for monetary policies to trickle down into all aspects of our lives.

While you may not be feeling the pain yet (though if you own a home or have a variable rate mortgage, you certainly are), the coming recession will touch you and everyone you know.

It’s impossible to predict exactly when we’ll feel maximum pain from the Fed’s actions, but if I were to hazard a guess, I would say next summer is going to feel very dark indeed.

Oh, and did I mention there’s a war going on, myriad supply chain problems, a coming energy crisis in Europe and a slowing Chinese economy?

When people start losing their jobs and their homes, you can bet they aren’t going to be holding onto algorithm-based boutique assets with no intrinsic value because they have funny pictures of a dog on them or something.

Manufactured assets

Which brings us to cryptocurrency. If you want to see how an injured economy can take down fake assets, read a book called Origins of the Crash about the Dot Com unwinding.

When the rug pull came and the tide went out, many of the darlings of the new tech economy went to zero.

That’s because an over-exuberant market pumped them to truly insane valuations despite the fact they weren’t real assets and they didn’t generate any money.

Remind you of anything?

When joke cryptos pumped to multi-billion dollar market caps and Ape .jpegs started commanding price tags worth hundreds of thousands of dollars, the top was in.

The Ponzi scheme is collapsing before our very eyes.

Bitcoin isn’t special

What about Bitcoin?

The laser eye boys wanted us to believe that it was an inflation hedge.

Well, inflation is through the roof, and where is Bitcoin?

Down 73% percent over the past year.

Bitcoin isn’t special. It’s a risk asset like any other, only it’s extra risky because it’s not tied to a real business and it doesn’t pay you dividends to hold onto it.

It’s an asset made of air that relies on a market to prop it up.

And every time a well-known coin (Luna) or crypto exchange (FTX) goes belly up, people lose money and lose confidence in the system.

Like I said, fads are the first things to go when times get tough.

What’s next?

So where does Bitcoin go from here?

In the below video and in this article, I suggested if Bitcoin didn’t hold $19,000 per, the next leg down would be a big one.

Well, at the time of this writing, we’re at $16,500.

This is where I expected a little bounce before continuing down to the $12,000 level. Then we decide to go next.

If we do in fact fall into deep recession, however, we’re just getting warmed up.

A return to the COVID-era low of $5,000 is not outside the realm of possibility.

Thank you for reading this article all the way to the end. If you enjoyed it, please give it a few claps so others can find it!

The views in this article are the personal views of the author. This commentary is provided for general informational and entertainment purposes only and should not be construed as financial, investment, tax, legal or accounting advice. It does not constitute an offer or solicitation to buy or sell any securities referred to. Consult your financial advisor prior to making financial decisions.

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