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US gov’t debt downgraded — Huge news for Bitcoin?

August 11, 2023 Coin Telegraph

Bitcoin Price

Cointelegraph analyst and writer Marcel Pechman explains why the downgrading of U.S. government debt will negatively impact the price of Bitcoin over the next few months.

On this week’s episode of Macro Markets, Cointelegraph analyst and writer Marcel Pechman explores the United States debt downgrade by Fitch Ratings. According to Pechman, this change signaled diminished confidence in the U.S. government’s ability to handle its fiscal responsibilities.

The downgrade nudged investors into a cautious stance, leading many to move their money out of assets such as stocks, silver, oil and long-term bonds. Instead, they turned to cash and short-term instruments, which are perceived as safer options in uncertain times.

Interestingly, the cost of insuring U.S. sovereign debt against default — as indicated by credit default swaps — has largely remained stable post-downgrade. According to Pechman, a potential reason is that U.S. Treasurys are considered one of the safest investments globally because the U.S. government backs them.

Consequently, Bitcoin (BTC) is under pressure from the U.S. government’s debt downgrade. The initial flight to liquidity often overlooks the benefits of decentralized assets during early market turbulence.

Pechman believes that those models cannot calculate what happens to liquidity, or more specifically, the order book depth. For instance, what are the consequences if the U.S. government withholds the yield of its debt held by China?

Pechman also discusses the latest European Union bank stress test showing three institutions “falling short.” The European Banking Authority said the test included 70 banks, representing about 75% of banking assets in the EU.

Pechman explains that everyone knew how risky Credit Suisse and Silicon Valley Bank were, but no one expected the investors’ confidence in those institutions to erode so quickly. Consequently, it seems to be a matter of appearance, regardless of the liquidity conditions.

Macro Markets runs exclusively on the new Cointelegraph Markets & Research YouTube channel, so make sure to like and subscribe today!

De-dollarization: Is it really happening?

June 9, 2023 Coin Telegraph

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In our latest Cointelegraph Report, we analyze the causes leading to the decline of the U.S. dollar as the world reserve currency and its potential implications.

De-dollarization, the decline of the United States dollar as the world’s dominant reserved currency, is underway, and it’s gaining momentum.

For over 100 years, the U.S. dollar has been the world reserve currency, which means it has been the dominant foreign currency held by central banks to carry out international transactions and settle international debt.

However, in the last 20 years, the dollar’s dominance in countries’ reserves has decreased from 70% to under 60%, according to the International Monetary Fund.

This trend has been accelerating since last year, when the U.S. and its allies froze Russia’s dollar reserve as a response of the country’s invasion of Ukraine.

Since then, several countries have been looking for alternatives to the U.S. dollar. Some are discussing the creation of new currencies for international trade, while others are buying an increasing amount of gold to diversify their reserve.

Bitcoin (BTC), a nascent asset with many of the characteristics of gold, may also benefit from this trend in the long run.

To know more about the causes and implications of the U.S. dollar decline and the assets that will benefit from it, watch the latest Cointelegraph Report on our YouTube channel and don’t forget to subscribe!

The US Treasury is running out of cash — trouble ahead for Bitcoin?

May 22, 2023 Coin Telegraph

Coin Telegraph

Cointelegraph analyst and writer Marcel Pechman explains how and why the U.S. Treasury is quickly running out of cash, and what that means for Bitcoin and the crypto market.

Macro Markets, hosted by crypto analyst Marcel Pechman, airs every Friday on the Cointelegraph Markets & Research YouTube channel and explains complex concepts in layperson’s terms, focusing on the cause and effect of traditional financial events on day-to-day crypto activity.

The latest Macro Markets show discusses the impact of the United States debt crisis as the government quickly runs out of money, a billionaire’s investor alert for an incoming economic bubble burst, and why Walmart’s better-than-expected earnings are a warning sign for investors.

According to Pechman, the government has incentives to show desperation and scare the general public into pressuring Congress to approve another increase to the debt ceiling. The risks of a government shutdown and subsequent default exist, which could lead to a wave of bankruptcies and stock market crashes as people rush to liquidate assets for cash.

In such a “black swan” scenario, Bitcoin (BTC) could face a 40% to 80% drop in a couple of days, according to Pechman. But there’s a catch: why would investors keep huge cash positions after the dust settles? As soon as the government raises the debt and issues more money, it’s instantly diluted.

Next, Pechman discusses billionaire investor Stanley Druckenmiller’s warnings of the “biggest and probably broadest asset bubble.” Stanley believes that what we’re seeing right now in terms of unemployment, delinquency rates and corporate earnings is completely masqueraded by artificially low interest rates.

Lastly, Pechman debates Walmart raising its full-year outlook as first-quarter sales top expectations. According to Walmart’s CEO, the consumer discretionary sector is not doing well. The sector’s performance is quite the opposite, with higher incomes moving away from more expensive stores and moving to low-cost retailers.

Pechman explains that such news should initially concern Bitcoin and crypto investors since the younger audience is highly relevant to demand. Therefore, as Drukenmiller said, be prepared for unbelievable opportunities ahead.

If you are looking for exclusive and valuable content provided by leading crypto analysts and experts, make sure to subscribe to the Cointelegraph Markets & Research YouTube channel. Join us at Macro Markets every Friday.

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