Title: Sideways Volatility Can Shake Ordinary Investors Out of the Game, While the Market Rises When You Give Up
Introduction:
This article, sourced from @DistilledCrypto’s tweet and compiled, translated, and written by 深潮, discusses the impact of policy changes, unprecedented volatility, and the positive aspects of volatility in the cryptocurrency market. It also explores the influence of debt on cryptocurrency and highlights the perspectives of Larry Fink and CG, a macro expert.
Table of Contents:
1. Affected by Policies
2. Unprecedented Volatility
3. Why Volatility is a Good Thing
4. The Impact of Debt on Cryptocurrency
5. Larry Fink’s Perspective
6. CG’s Macro Update (Late Q2)
7. US Treasury Repurchase
8. Index-level Summer
9. Narrative Fatigue
10. The Most Painful Market Trends
11. Betting on $ETH
12. Respecting Probability
13. When Will Liquidity Flow into the Market?
14. CG’s Prediction for the Second Half of 2024
Content:
When it comes to liquidity, more money entering the market usually means higher cryptocurrency prices. However, the current market remains dry, with no sign of an upcoming “rising tide” in 2021. To explore some clues, I examined the insights of macro expert CG (@pakpakchicken) who spends hours each day tracking policy changes. He concludes that the greatest risk lies in an upward trend, a viewpoint shared by @CryptoHayes and @RaoulGM.
An Overlooked Insight:
@pakpakchicken points out that few people discuss the possibility of a weakening US dollar. He predicts a coordinated devaluation of the dollar in the future, which could increase liquidity. To provide some context, let’s review the policy background around 1985 when there was tight monetary policy, high long-term interest rates, a strong dollar (investigating the “milkshake theory”), and a high deficit.
Unprecedented Volatility:
As the volatile season approaches, @pakpakchicken predicts extreme turbulence driven by the US’s need to repay $35 trillion in debt.
Why Volatility is a Good Thing:
@pakpakchicken believes that volatility is not a flaw but an ideal characteristic for profit. Significant gains are made during short-term explosions. Sideways volatility can shake ordinary investors out of the game, while the market rises when you give up.
The Impact of Debt on Cryptocurrency:
To manage its massive debt, the US may increase liquidity to devalue its currency. This will ensure controlled debt rollovers, as without these measures, yields could spiral out of control. Larry Fink, the CEO of BlackRock, mentioned the insufficiency of increasing taxes or reducing debt to solve the national debt problem. He emphasizes the importance of building new infrastructure, as it not only promotes economic growth but also lays the foundation for future development.
CG (@pakpakchicken) believes that institutions will tokenize all assets as long as the US dollar remains valuable. In Q2, weekly liquidity support in the US reached up to $2 billion per operation, with the Quantitative Tightening (QT) decreasing from $6 billion to $2.5 billion monthly. The US policy has intensified short-term note issuance, while the Chinese yuan may face devaluation. The liquidity growth of trillions of Chinese yuan could be beneficial for cryptocurrencies, hinting at potential upward trends in the second half of the year.
CG (@pakpakchicken) emphasizes the importance of narrative understanding. Market narratives drive the market until their value is exhausted. The CPI/inflation narrative is weakening, and recent reports lack influence. The next mainstream focus will be on employment, as interest rate cuts may occur earlier than expected due to the instability of bank reserves. In summary, CG expects the market to experience the “most painful market trends” as macro forces converge.
Before reaching the “most painful market trends,” several signs will occur, such as the retail sector not preparing for an uptrend, influential figures claiming that the market has already peaked, market makers shorting, and overwhelming bearish positions. The ultimate result is likely to be a significant increase.
CG (@pakpakchicken) believes that $ETH will stand out during the uptrend. As Larry Fink pointed out, debt is unsustainable in the long run. While the US dollar holds value, everything will transition and tokenize. Only one L1 has stood the test of time and has the highest adoption rate so far, namely ETH. Although CG tends towards an uptrend, further decline is still possible. Macro expert @fejau_inc sees the economic growth slowdown as a fundamental factor, identifying significant unexpected downside risks not seen since 2019.
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