Circo Loco

  1. There are those who must decide whether to allocate more fiat into crypto. They are chiefly concerned with the amount of monetary debasement that will or will not occur. “Do I sell USD to buy Bitcoin or Ether?” Their benchmark is outperforming the growth in fiat money supply.
  2. There are those who must decide whether to allocate more Bitcoin or Ether into other types of tokens. They are chiefly concerned with finding projects whose technological impact or user adoption will grow quickly, such that the price outperforms Bitcoin / Ether. “Do I sell Bitcoin / Ether to buy Solana, Cosmos, Terra etc.?”
  3. Finally, there are those who must decide if it is time to liquidate their crypto holdings and return to fiat / government bonds. They must determine whether this is the part of the cycle where the crypto complex drops 75% — 90%. They want to protect the value of their wealth in terms of units of commonly used hydrocarbons such as oil and natural gas.

Jerome Powell suggests it’s time to stop describing inflation as ‘transitory’

As I mentioned in Chain Reaction, I believe Democrats are two-stepping into a shellacking in the 2022 midterm elections, courtesy of fiscal and monetary enabled inflation. Like a good government employee, the Fed Chair always does what the big man requires, regardless of his political party. The President needs to Whip Inflation Now, and he has called upon the esteemed Federal Reserve board of governors to change their tune.

Powell Vows to Speed-Up Taper, Market Falls

Many market participants naively believe that the fundamentals of the stock market — and risk assets in general — are buoyed by actual economic strength, rather than wanton money printing. Every time the Fed signals that it will reduce the pace at which it indiscriminately purchases bonds, the market reacts negatively over time.

  1. For those who are deciding whether to allocate more fiat into crypto, it pays to wait. I don’t see money getting any free-er or easier. Therefore, it pays to sit on the sidelines until the dust settles after a March 2022 or June 2022 Fed rate hike. Watch out for a puke fest in risk asset prices should the Fed hike, followed by a quick resumption of zero interest rate policy and aggressive bond purchases. When the Fed signals a return to business as usual, then it’s time to back up the truck.
  2. For those who will maintain their macro crypto exposure, but must allocate amongst various coins, the coins that outperform will probably be Metaverse, Play-2-Earn, or NFT-related. The success of these themes do not hinge on global monetary conditions, but an actual change in behavior of actors whose lives can be dramatically improved by adopting new forms of technology.
  3. For those who like to trade around their crypto vs. fiat positions, I would err on the side of USD strength and the long bond performing well in the medium-term. Again, monetary conditions in the best case will be at a standstill, and in the worst case will become tighter.

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Arthur Hayes

Arthur Hayes

49.96K Followers

Co-Founder of 100x. Trading and crypto enthusiast. Focused on helping spread financial literacy and educate investors.