Oversold or More To Come?

The last few days have sent shockwaves through crypto but not only crypto also the markets. I will admit I don't understand the economy and all of that as detailed at most but I like to try and educate myself on matters as much as possible with the time I do have.

So what exactly took place over the last few days to cause this?

One of the hot topics as of late has been the soaring inflation rate which is 8.5% a number not seen since the 1980's. There was a time however it was much worse in the double digits in the 1970's and one of the lessons learned from that by the fed was to increase the rate. This rate was a 0.25% and is now at 0.75%

A high inflation rate actully means things are pumping in the economy and people are buying outside the pace of what it can supply. However there's a bit of a bottleneck here that is a unknown about how everything will react. That was a 2 year lock down period around the world and is still in effect in some parts. This means a shrinkage in consumer projects being ejected out while demand raises. There is also a rather large war with many scary factors in it including the threat of nuclear war.

All of these things are creating some very unique cases in which everyone is trying to figure out.

Combine the inflation rate and overlay it with the fed interest rate seen here

For the most part it's come well under control but to me it almost looks like based on history that the fed needs to be a 3%-5% however again to be clear there are many factors going on in the world still that are outside the scope of the history we see here.

The main job of a higher fed rate is that people stop spending and instead holding. This in turn should allow for a build up in supplies in theory.

So Is The Worst Over?

For the most part it seems that way. That heavy sell off we had in crypto also had the perfect storm of just about everything that could go wrong. But the prices we see today that are starting to rebound from a most likely oversold market are numbers we saw just a year ago that was based on FUD and China kicking out bitcoin miners.

So while it seems like the worst of it is over there's another point to take into account. As the fed increases rates that means a slow down for businesses and that means lower profits for businesses and what normally triggers a sell off in stock which we also saw. The fed most likely will continue to increase rates this year and possibly into next to what I feel will be around the 2.5% - 3.5% rate. Again there's other factors in play here such as supply issues (or so they say) that will cause inflation in itself.

That's going to cause the markets to stagnate and most likely compress down which is also going to cause crypto markets to further slow down and restrict. It could be some time before we see crypto rally again looking at end of 2023 and into 2024 for the next bitcoin halving event. Or we could see crypto do one of its wild rallies again while the stock market stays stagnate as more people look towards crypto than ever before compared to stocks.

What are you thoughts on when we could see a strong rebound again?

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