Of all the crazy market movements today, the most significant involves the U.S. dollar, which slipped to its lowest in two years. Click to tweet
In this graph, we can see that the Dollar Index chart has been declining since late-May, and has now sunk below the near-term support (yellow line) on its third attempt.
The Dollar Index, however, only really shows the U.S. dollar’s place within the currency markets. In fact, the purchasing power of all fiat currencies has been falling steadily for many years, a process that has been vastly accelerated by recent events.
With stocks and altcoins, especially the very trendy meme-driven shares and tokens, blasting to the moon, it’s easy to overlook some of the soft spots that are growing at the moment, especially the vast disconnect between the real economy and the markets.
This disconnect is a dynamic that couldn’t possibly be explained solely by asset inflation, retail FOMO feels, and Federal Reserve money printing.
Below the surface, and few noob day traders really understand this, is a massive rotation out of the bond market and into everything else, anything else for that matter.
In a typical traditional portfolio, bonds might make up about 60%, give or take. However, the Fed’s artificial low interest rates and increased liquidity injections have sent bond yields literally through the floor, making the entire asset class less attractive.
In a given day, I tend to watch/listen to roughly three-to-six hours’ worth of financial television/radio. Over the last few weeks, we’ve not heard from a single analyst or money manager who is actually purchasing U.S. debt, so that means that the Fed may be the only entity actually buying. Awkward!!
A big bond blowout is by far my biggest fear right now, and I pray every day that this does not happen. As much as bitcoin would likely experience a full moon, the consequences to society would almost definitely not be worth it.
Markets are a mixed bag of nuts today. Most digital assets are deep in the red at the moment, especially some of the high-risk ones. I take no pleasure in having called the top there. Too many new people have lost their money already.
Though we may see a nice rebound and break new highs, there’s certainly no guarantee of that. The key to trading high-risk markets is proper money management, especially when assets are trading in a parabolic cycle, take your profits frequently and always diversify your holdings.
My preference, especially in the current crypto market, is to hold onto the more stable store of value coins, the ones that have already established a presence and network, and also have a strictly limited supply.
At any rate, this market continues to be a crazy one, so we will have to wait and see how things play out over the coming weeks and months.