Why You Should Ignore the Fearmongering
Russia, Russia, Russia.
Nope, not a diatribe on the political discourse of the Trump years. More a comment on the new Russia/Ukraine dustup that, in turn, has lots of folks on tenterhooks. It certainly has the financial and crypto markets in the doldrums, which I will come back to in a moment.
First, for what it matters, my wife is Ukrainian/Russian. Her bother is a chemical engineer in Kiev. She talks to him daily. He says among his friends in the upper class of Ukrainian society, there’s not a lot of consternation. They don’t think an invasion actually happens beyond a couple of disputed regions of separatists. I don’t have anything to add to that because I am not in a position to know, frankly. But I pass that along simply as a bit of info coming directly out of Kiev.
Moving on to the impacts on crypto…
Wherever the truth ultimately lies—war/no war—the crypto markets have been touched by this moment. They were already in a funk because of the Federal Reserve’s push to drive interest rates higher.
Investors tend to dump “risk assets” in order to chase higher, safe yields on bonds.
Makes sense in the abstract.
Makes no sense in the reality of the moment.
Inflation, as I’ve pointed out a few times—and as your wallet certainly knows—is running in the 7% per year range. The Fed pushing up interest rates by 0.25% or 0.5% is going to mean exactly nothing to anyone’s ability to earn a meaningful, safe return on their cash.
That fact is going to sink in once we get past the Fed’s March meeting, when the economic pooh-bahs are expected to raise rates.
The market is going to digest the rate hike. It’s going to look at the slowing economy. And it’s going to scratch its head and think, “hmmm. I’m still earning next to nothing in these safe assets, but inflation is robbing me. Maybe these safe assets aren’t really that good for me.”
And we’re suddenly going to see money flowing back into stocks and crypto.
Now, to be clear, I think stocks are largely overvalued. That view hasn’t changed. But overvaluations can persist for a long time, particularly in an environment where investors can’t find returns on cash and bonds.
We’re going to remain in that world for a while, despite the Fed…and so I would expect to see a return to risk assets.
Which is why I’m watching crypto closely. And it’s why I’m continually turning dollars into cryptocurrencies.
It’s the same message I am sharing with my landlord, Peter, who is worried again about the falloff in crypto prices.
Patience is my message. I know it’s a stale message. But it’s the right message for this moment.
Crypto is not in a bear market. It’s in a funk because of news events swirling about.
I am active in the cryptosphere literally daily. Easily 12 to 14 hours per day. I’m on conference calls with developers, founders, and executives of a decentralized finance firm for which I am a consultant. I am on conference calls with the founders and executives of a sports-based NFT project for which I am an adviser (NFTs are non-fungible tokens, or unique, one-off crypto-based assets).
I interview crypto project teams weekly. And I am part of several private Twitter and Discord channels filled with financial whales and some of the biggest crypto influencers.
I can tell you I don’t hear even a shred of doubt. I hear moaning about this and that. But no one is even remotely worried that this is a bear market.
They all see it as a buying opportunity. Many are loading up on all sorts of crypto that pay out a nice income.
These are the voices I trust—not the media that constantly tells me about the problems in crypto.
These people I talk to daily are the ones who are running real crypto businesses. And I will always put my money with the guys and girls who are neck-deep in the real world of crypto, rather than the outside observers offering commentary on that which they are clueless about.
So, the takeaway that I hope is not too subtle in all those paragraphs above: Now is a great moment to be greedy when others are shaking in their boots.