Nothing Has Changed

We have had an incredible rally in Crypto to start off the year. January alone saw Bitcoin rise nearly 40 percent with Ethereum right behind it at a 33 percent gain. Not to mention several of the smaller alt coins that did several hundred percent gains as is their nature when the major coins run. These are incredible moves and they make even the best investors question their thesis. Is the bottom in? Are we in a new Bull Market?

I wrote just a few weeks ago about how I believe we have not seen the worst yet and so far that has proven to be totally wrong. However, nothing that has underpinned my argument has changed and I still believe there is a nasty drop to come. The major question is will we see new lows? That, I am becoming more skeptical of although I believe it’s still a decent possibility given the underlying financial conditions.

To give you more perspective on whats going on, as I mentioned in my previous issue, people love to make money, they love the idea of a new easy bull market and they are eager to participate and get in. However, this is not typically how bear markets end. They don’t end with massive retail buying and optimism. They typically end when no one wants anything to do with the asset. Even after a 20-30% rise off the lows.

This market has largely been obsessed with the Federal reserve in a way that is truly unprecedented. Never before did you have market participants tuning in to each and every word the federal reserve governors say. Yet this market is hinged on exactly that. It’s not healthy and it doesn’t really make sense. For the last 10 years the saying was “don’t fight the fed” while it was a bull market. Yet, here the market is trying to “fight the Fed” in a bear market?

I have written about this before, but the fact is people have way too much money right now. The government was literally handing out checks to people a few years ago and printing money through their ears. That money is still in the economy and people have saved and earned enough through that stimulus that they are not feeling real pain yet.

I have a feeling that is going to change very soon. If you don’t know someone that hasn’t been laid off yet then you might want to check on your friends. I personally know several people who have lost their jobs recently. The catch is that most people get severance pay when they lose their jobs so they are still okay for the next 3-6 months. However, when that money dries up and all the recent lay offs catch up, I highly doubt people will be piling in to speculative investments when they have no income and have living expenses to pay for.

But don’t take my word for it let’s just review some of the 2023 outlook and see where were at.