Last week the crypto Market looked like it was ready to Rally until two significant macro factors intervened to poop the party.
The first Factor was OPEC’s decision to cut oil production by 2 million barrels per day, something I’ll come back to again a little later.
All you need to know for now is that this restriction of Supply is likely to increase inflation around the world, this in turn will force central banks notably the US federal reserve to continue raising interest rates aggressively to fight inflation.
This continued raising of interest rates will cause assets to continue to crash as liquidity AKA money is sucked out of assets and Into Cash.
Lots of liquidity is also moving into government debt given that it is offering higher interest rates, thanks to the central banks, well that’s the financial system for you.
Now the second macro factor that moved the crypto markets was the release of the September unemployment statistics for the United States while unemployment was expected to rise due to poor economic conditions it instead unexpectedly fell suggesting the US economy is in better shape than previously thought.
In theory this would be a good thing but in practice it’s not.
This is because the FED’s two jobs are to ensure a two percent inflation rate and a four percent unemployment rate with an unexpected 3,5 unemployment rate for September.
This gives the FED the wiggle room it needs to continue raising interest rates because investors are always trying to price in what will happen over the next 6 to 12 months.
Both the crypto market and the stock market crashed when the positive unemployment figures were released, again that’s the financial system for you.
Good news can be paradoxically bad for assets, who says it has to make sense? now the only crypto specific factor that seems to be weighing on the crypto Market these days is regulations.
One of those Infamous International organizations is set to draft regulatory recommendations for cryptocurrency this week.
Naturally these recommendations tend to be more instructions that countries must follow or else.