Cryptopocalypse, Inflation and Oil Reserves

20 Mei 2021

The main event of yesterday is without a doubt the apocalypse in the cryptocurrency market. In our opinion, everything that happened was more than expected (not in terms of the time of occurrence, but the final outcome - the collapse of the bubble in the cryptocurrency market), but many were taken by surprise.

The formal reason for the panic wave was a message from the Bank of China about a ban on financial institutions from offering services related to cryptocurrency assets. But if our readers follow the cryptocurrency market, they know that there is nothing fundamentally new in this information. China has long and consistently opposed cryptocurrencies and other obscurantism under the guise of a revolution in the world of finance.

So it's not China at all. And not in the Mask, and not in Tesla, and not in ecology. It's about the essence of things. And the bottom line is that the intrinsic value of cryptocurrencies is virtually zero. This means that any price other than 0 is already expensive. Yes, the statement is largely controversial and you can come up with a lot of arguments in favor of the non-zero cost of a single cryptocurrency, ranging from the cost of mining to functions that have fundamental value and utility. But in any case, these hundreds and thousands of percent of growth cannot be substantiated with anything objective. The discussion will still slide into the prospects, the future, new technologies and other dreams of crypto enthusiasts.

In total, you should not think that yesterday's prices on the cryptocurrency market are the bottom of the abyss, into which everyone has looked. The abyss is sure to look back.

But God bless the crypt. The inflationary spiral is starting to unfold around the world. Following the USA, we have the highest rate of growth in production prices in the UK. Inflation is also growing in Canada, at a rate that exceeds the expectations of experts. This means that the era of tightening monetary policy is not far off. In this light, one should not be surprised by the sell-off in the stock markets. As soon as the central banks make it clear that they have heard the inflationary signal, we will see a full-fledged panic. In yesterday's minutes of the FRS, only the first signs of this have appeared (discussion of the reduction of the asset repurchase program), so it is too early to panic.

Prices crashed yesterday on the oil market. Again, nothing unexpected. But somehow the voices about 100 oil were abruptly quieted down. The formal reason is the growth of reserves in the United States, an increase in production in Iran. But all these things are formal, as is the case with the cryptocurrency market. The essence of things is that prices have climbed too high relative to the reality that exists in fact, and not in the minds of optimists.