In the first part of the article, we looked at why bitcoin can fall even to zero, but stocks can't. Now let's look at the specific reasons for the fall of the entire cryptocurrency market in 2022. First of all, these are the actions of the Fed. Yes, it is the Fed that is the central bank of central banks, because the dollar is the world's reserve currency and most other central banks in the world keep their assets mostly in the US currency. That is why a lot depends on the actions or inaction of the Fed in the modern economy. What do we see? In 2022, the QE (quantitative easing) program and ultra-low rates were replaced by the QT (quantitative tightening) program and the policy of aggressive rate hikes. That is, if until 2022 the Fed actively stimulated the markets at the expense of the printing press and almost zero rates, now the reverse process has begun: the excess money supply, thanks to which we partly observe ultra-high inflation, is withdrawn from the economy, and rates are actively rising. While this does not lead to the expected effect, since inflation remains very high (by the way, why is bitcoin no longer used as a means of hedging inflation?), however, there will be a result in the future. It should be remembered that inflation accelerated to the current values, not in 2-3 months. It took more than a year. And as we know, "to break is not to build." The recovery process will take longer. Accordingly, if the policy of aggressive tightening is maintained, the process of returning inflation to the target value will take 2 years. All this time, market conditions will get worse.
And worse conditions – less investment. This is the main fundamental reason for the fall of bitcoin. There are others. For example, the "coronavirus" pandemic, initially played into the hands of the "bitcoin". However, it was not the pandemic itself that played, but the soft monetary policy of central banks, which was introduced in connection with the pandemic. Now, when the pandemic seems to be over, but the logistics chains have not been rebuilt, the problem remains a problem. The geopolitical conflict in Ukraine is another reason for the fall of risky assets since during the instability on the political map of the world, investors try to keep their funds in the safest assets, which, by the way, are now also growing in their profitability (as rates are rising). As a result, many investors (certainly not Michael Saylor from Microstrategy) believe that now is not the time to take risks, but the time to save accumulated capital. Naturally, they choose the most stable stocks, growth stocks (but even this does not save the stock market from falling), bonds and bank deposits, as well as other assets. And, from our point of view, this trend will continue for a long time. And then the cryptocurrency market will need concrete reasons to start forming a new "bullish" trend. Only now without the help of the Fed, which has been printing $ 120 billion a month for two years and applying the practice of "helicopter money".
