An interesting discussion brought up in the private groups today. What is the emerging market crisis? Why is it happening? Is this good news for BTC?
Image one is the MSCI emerging market index. This index summarizes 23 economies including Brazil, China, Thailand, Turkey and Indonesia. As you can see this has had a 20% decline since reaching a peak not seen since the 2008 financial crisis, right before the biggest percentage drop ever recorded.
The emerging market crisis has many factors, too many to be discussed. An interesting one involves the Federal Reserve. They control the USD through “Monetary Policy” and are increasing interest on the credit they give. The effect strengthens the USD making America’s bonds more profitable but also dramatically slowing their economic growth. These actions have rebalanced global money as investors return to American bonds after years of purchasing from emerging markets.
Why are America raising interest rates to slow growth? The S&P 500 just set a new all-time high making America the most valuable it has ever been. It is another index consisting of the 500 best performing American companies. The growth has been constant and will likely continue for the next 2 years. Growing parallel with this growth is Americas debt now standing at $21,000,000,000,000, $65,000 per tax payer. You might realise what is fuelling this growth. The bust is considered by many inevitable. The wealth gap is now the largest since 1935 with the top 1/10 of 1% richest is equal to the bottom 90% combined. A sub effect of Monetary Policy through Quantitative Easing.
How does BTC come into this? It is generally well known in economic circles that precious metals, including gold, tend to be the go-to investment during times of financial crisis. However, precious metals aren’t very practical, we all just agree they are valuable. Wouldn’t BTC be much more useful? People of Venezuela proved this. When their country collapsed after experiencing 1,000,000% inflation the BTC trading volume of Venezuela skyrocketed much more than other neighbouring countries. Check out the last graph. What if this were to happen on a global scale? Think about it.