Back in August last year, I first made a post on my thoughts on the stock market and concluded that the market was overvalued from a long-term perspective but in the very short-term (back then) it still had gas to reach a new all-time high (ATH). Sure enough, the market reached a new ATH but it soon went through a correction and I shared my thoughts too after the correction. In the same post, I said,
In the short-term of about 3 months to 1 year, I think the market is going to rebound and possibly make new highs again.
And it did rebounded but is still struggling to make new highs. So what are my thoughts on the stock market now? I think it is still going to make new highs but when it crashes, it is going to be massive and result in a recession. The flattening and inverting yield curves are the best indicator of investors being increasingly pessimistic of the shorter term, signalling a recession is round the corner.
The Question and Some Theories
Most of us on Steem are cryptocurrencies investors or at least a hodler. So one of the important questions to ask is whether Bitcoin and other cryptocurrencies will do well during a recession or will it also crash together with the stock market? There are 2 schools of thought. Some believe that Bitcoin and cryptocurrencies are alternative investments that are a store of value, like gold. If you are with this school of thought, then logically, you will think that cryptocurrencies will fare better than stocks during a recession. On the other hand, some people think that cryptocurrencies are speculative assets and will probably be the first to crash before the stock market does.
One of my favorite Youtuber, Alession Rastani, recently made a video on this topic. Here it is,
In this video, he pointed out that contrary to popular belief, gold prices also dropped during recessions. This is because the common people would be struggling to make ends meet and assets like gold need to be liquidated in order to get through with their daily life.
In the same video, guest Zak Mir made a different prediction. He thinks that Bitcoin will do well in the next recession. This will be especially true if the recession is due to problems with the current monetary system.
My Thoughts
I am leaning towards Zak Mir's theory. Bitcoin has not gone through any major recession yet, so nobody knows how this new kind of asset is going to be like during a recession. But we can take a look at what is happening in Venezuela, Turkey and some other countries that are going through some kind of recession. In those countries, Bitcoin and other cryptocurrencies are rising in popularity and adoption.
During a recession, governments will have to make drastic measures on their monetary policy that, most of the time, devalue their local fiat currencies. In the past, before the invention of Bitcoin, people have no choice but to sell other assets into fiat to carry on with life. That is because they are unable to spend those assets without first converting them to fiat. With Bitcoin, it is a totally different story. Bitcoin is internet money and can be spent rather easily. This adds a different variable to the entire equation. Hence, I think Bitcoin is going to do well in the next recession.
What do you think? Let me know and thanks for reading!