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Cause and effect: Will the Bitcoin price drop if the stock market crashes?

Could Bitcoin’s halving cycles power through a hypothetical post-COVID economic crisis, or is BTC destined to be correlated with stocks?
The year 2009 was marked by both the genesis of Bitcoin and the United States stock market startin

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Could Bitcoin’s halving cycles power through a hypothetical post-COVID economic crisis, or is BTC destined to be correlated with stocks?

The year 2009 was marked by both the genesis of Bitcoin and the United States stock market starting an unprecedented bull market — one that’s continued almost uninterrupted since. However, murmurings of a crash are always present, and the noise has recently been getting louder. 

Against the backdrop of COVID-19 refusing to go away, stocks keep pushing higher, backed by an unprecedented amount of government support. But now that quantitative easing policies are no longer being implemented, is the talk of a stock market crash justified?

If so, this could bring unfortunate news for Bitcoin (BTC): It could be argued that there are signs of a strong correlation between Bitcoin and stocks. So, what may happen to crypto if the bottom falls out of U.S. equities?

How likely is a crash?

Taking crypto out of the picture, the increasing speculation that a crash is imminent does hold some merit. In June, the inflation rate in the U.S. was significantly higher than expected. In the meantime, the government continued to issue bonds and accrue more debt to the point that there’s now talk of raising the debt ceiling.

The justification for this is, of course, the ongoing pandemic relief effort. But the government is pumping money into the economy when other signs, such as U.S. stock prices, indicate that the relief isn’t needed. U.S. real estate markets are also surging, while the Federal Reserve has already expressed concerns that investors are becoming increasingly reckless, referencing the appetite for meme stocks and cryptocurrencies as cases in point.

All this money pumping into the economy has to dry up at some point, leading to justifiable speculation that a crash could be the inevitable consequence. Michäel van de Poppe, Cointelegraph columnist and full-time trader, believes that “the expectations of a heavy correction are justified,” adding:

“The chances of a [stock market] collapse are increasing day-by-day, as the markets are getting overheated heavily — not just in stocks, but real estate markets are showing similar signals. [...] The market is going into a bubble phase, created by an insane amount of printing from the Fed, through which the middle class is getting squeezed.”

Toya Zhang, marketing manager at AAX exchange, agrees that a crash is coming but urges caution on attempting to predict the timing. “Given how common stock market declines are, and the fact that the market is somewhat overvalued, I think there’s a reasonably high probability of a stock market downturn,” Zhang said. “Nobody can say exactly when that will happen, though.”

Correlated for now, but for how long?

One question is: How linked were the recent market recoveries in both crypto and the stock market back in March 2020? Most stock market analysts were surprised by how fast and furious the recovery was. Although, the fact that the S&P 500 skews heavily to tech companies explains a lot given how quickly the world turned to digital.

But in the crypto space, the narrative was somewhat different. In the absence of any other explanation for the crypto market crash, most people were surprised that Bitcoin had behaved in a way that appeared to mirror stocks. After all, the assumption had always been that BTC was uncorrelated and would act as a hedge against more traditional asset types such as stocks and precious metals.

Based on the most recent experience, history would suggest that if the stock markets were to crash in 2021, the crypto markets would follow. An alternative scenario would be that the stock market crashes and investors immediately move funds into crypto. Even without the benefit of March 2020 hindsight, this seems unlikely. Crypto still has a reputation as a notoriously volatile asset, one that’s untested as a safe haven in a financial crisis.

However, what happens post-crash could make for a more interesting discussion about market correlations. What if, this time around, the stock markets don’t go into automatic recovery mode? This scenario is a reasonable assumption, given that the pandemic effect is now priced into the markets, and there’s a lot less uncertainty than there was in March of last year.

What would BTC do in the event of a prolonged flat or even bearish period in U.S. stocks? The most powerful premise for the “Bitcoin is uncorrelated to stocks” argument is that Bitcoin has its own market cycles — linked to halving — that dictate its price movements in a far more compelling way than any external economic forces. Examining it through this lens, one could speculate that regardless of whether the stock markets had recovered post-March 2020, BTC would have gone on to achieve new all-time highs anyway.

But even against the ever-reliable stock-to-flow BTC price model developed by PlanB, prices have been struggling to stay within the boundary of late. Nevertheless, the recent rally means that the model has held, and prices are currently showing significant promise of a sustainable recovery. So even if tumult in the stock markets were to cause chaos in crypto, there is data that predicts that the BTC market cycles could ultimately resume their apparently iron-clad control of prices.

A struggle of opposing forces

If there is a short-term crash, there is no evidence thus far to suggest that the Bitcoin price will fail to follow. Assuming this occurs in 2021, what will happen afterward could become a struggle between Bitcoin’s market cycles and the effects of a prolonged economic downturn.

However, assuming the effect of the former can outweigh the latter by even an increment, it would make Bitcoin attractive as a safe haven asset (in the absence of many other alternatives). If everything else is going down, BTC only needs to maintain its value to tempt investors. But suppose Bitcoin’s halving cycle proves able to negate the effect of a prolonged market downturn altogether. In that case, BTC could become one of the only assets to offer the opportunity for significant returns during a downturn.

Sean Rach, co-founder of not-for-profit blockchain services firm hi, believes that crypto will ultimately become an attractive asset for alpha seekers. “The growing dissatisfaction with the financial system, as well as the history of all fiat currencies, means the search for alternatives remains a positive factor for the growth of the crypto markets,” said Rach. Meanwhile, Mati Greenspan, founder and CEO at advisory firm Quantum Economics, told Cointelegraph:

“In the short history of the crypto asset class, the token market has largely moved in line with other risk assets like stocks and commodities. They tend to react especially well to central bank money printing. Still, there is a lot more room for growth in crypto since it's largely in the early development phase. So even if we see equities hit a top, I don't think it'll have any sustained impact on digital assets.”

Ultimately, it’s worth remembering that crashes are short-term events. They may be painful, but the longer-term outlook is where things get more interesting. Suppose stocks end up in a sustained bear market while the macroeconomy recovers. In that case, it could easily turn into an opportunity for investors to scoop up a bargain once crypto bottoms out. As such, while a short-term correlation could be hard to avoid, there’s every chance that crypto could buck the markets in the long term.

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Survey Shows Declining Concerns Among Americans About COVID-19

Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat"…

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Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat" to the health of the US population - a sharp decline from a high of 67% in July 2020.

(SARMDY/Shutterstock)

What's more, the Pew Research Center survey conducted from Feb. 7 to Feb. 11 showed that just 10% of Americans are concerned that they will  catch the disease and require hospitalization.

"This data represents a low ebb of public concern about the virus that reached its height in the summer and fall of 2020, when as many as two-thirds of Americans viewed COVID-19 as a major threat to public health," reads the report, which was published March 7.

According to the survey, half of the participants understand the significance of researchers and healthcare providers in understanding and treating long COVID - however 27% of participants consider this issue less important, while 22% of Americans are unaware of long COVID.

What's more, while Democrats were far more worried than Republicans in the past, that gap has narrowed significantly.

"In the pandemic’s first year, Democrats were routinely about 40 points more likely than Republicans to view the coronavirus as a major threat to the health of the U.S. population. This gap has waned as overall levels of concern have fallen," reads the report.

More via the Epoch Times;

The survey found that three in ten Democrats under 50 have received an updated COVID-19 vaccine, compared with 66 percent of Democrats ages 65 and older.

Moreover, 66 percent of Democrats ages 65 and older have received the updated COVID-19 vaccine, while only 24 percent of Republicans ages 65 and older have done so.

“This 42-point partisan gap is much wider now than at other points since the start of the outbreak. For instance, in August 2021, 93 percent of older Democrats and 78 percent of older Republicans said they had received all the shots needed to be fully vaccinated (a 15-point gap),” it noted.

COVID-19 No Longer an Emergency

The U.S. Centers for Disease Control and Prevention (CDC) recently issued its updated recommendations for the virus, which no longer require people to stay home for five days after testing positive for COVID-19.

The updated guidance recommends that people who contracted a respiratory virus stay home, and they can resume normal activities when their symptoms improve overall and their fever subsides for 24 hours without medication.

“We still must use the commonsense solutions we know work to protect ourselves and others from serious illness from respiratory viruses, this includes vaccination, treatment, and staying home when we get sick,” CDC director Dr. Mandy Cohen said in a statement.

The CDC said that while the virus remains a threat, it is now less likely to cause severe illness because of widespread immunity and improved tools to prevent and treat the disease.

Importantly, states and countries that have already adjusted recommended isolation times have not seen increased hospitalizations or deaths related to COVID-19,” it stated.

The federal government suspended its free at-home COVID-19 test program on March 8, according to a website set up by the government, following a decrease in COVID-19-related hospitalizations.

According to the CDC, hospitalization rates for COVID-19 and influenza diseases remain “elevated” but are decreasing in some parts of the United States.

Tyler Durden Sun, 03/10/2024 - 22:45

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Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While “Waiting” For Deporation, Asylum

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several…

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The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several months we've pointed out that there has  been zero job creation for native-born workers since the summer of 2018...

... and that since Joe Biden was sworn into office, most of the post-pandemic job gains the administration continuously brags about have gone foreign-born (read immigrants, mostly illegal ones) workers.

And while the left might find this data almost as verboten as FBI crime statistics - as it directly supports the so-called "great replacement theory" we're not supposed to discuss - it also coincides with record numbers of illegal crossings into the United States under Biden.

In short, the Biden administration opened the floodgates, 10 million illegal immigrants poured into the country, and most of the post-pandemic "jobs recovery" went to foreign-born workers, of which illegal immigrants represent the largest chunk.

Asylum seekers from Venezuela await work permits on June 28, 2023 (via the Chicago Tribune)

'But Tyler, illegal immigrants can't possibly work in the United States whilst awaiting their asylum hearings,' one might hear from the peanut gallery. On the contrary: ever since Biden reversed a key aspect of Trump's labor policies, all illegal immigrants - even those awaiting deportation proceedings - have been given carte blanche to work while awaiting said proceedings for up to five years...

... something which even Elon Musk was shocked to learn.

Which leads us to another question: recall that the primary concern for the Biden admin for much of 2022 and 2023 was soaring prices, i.e., relentless inflation in general, and rising wages in particular, which in turn prompted even Goldman to admit two years ago that the diabolical wage-price spiral had been unleashed in the US (diabolical, because nothing absent a major economic shock, read recession or depression, can short-circuit it once it is in place).

Well, there is one other thing that can break the wage-price spiral loop: a flood of ultra-cheap illegal immigrant workers. But don't take our word for it: here is Fed Chair Jerome Powell himself during his February 60 Minutes interview:

PELLEY: Why was immigration important?

POWELL: Because, you know, immigrants come in, and they tend to work at a rate that is at or above that for non-immigrants. Immigrants who come to the country tend to be in the workforce at a slightly higher level than native Americans do. But that's largely because of the age difference. They tend to skew younger.

PELLEY: Why is immigration so important to the economy?

POWELL: Well, first of all, immigration policy is not the Fed's job. The immigration policy of the United States is really important and really much under discussion right now, and that's none of our business. We don't set immigration policy. We don't comment on it.

I will say, over time, though, the U.S. economy has benefited from immigration. And, frankly, just in the last, year a big part of the story of the labor market coming back into better balance is immigration returning to levels that were more typical of the pre-pandemic era.

PELLEY: The country needed the workers.

POWELL: It did. And so, that's what's been happening.

Translation: Immigrants work hard, and Americans are lazy. But much more importantly, since illegal immigrants will work for any pay, and since Biden's Department of Homeland Security, via its Citizenship and Immigration Services Agency, has made it so illegal immigrants can work in the US perfectly legally for up to 5 years (if not more), one can argue that the flood of illegals through the southern border has been the primary reason why inflation - or rather mostly wage inflation, that all too critical component of the wage-price spiral  - has moderated in in the past year, when the US labor market suddenly found itself flooded with millions of perfectly eligible workers, who just also happen to be illegal immigrants and thus have zero wage bargaining options.

None of this is to suggest that the relentless flood of immigrants into the US is not also driven by voting and census concerns - something Elon Musk has been pounding the table on in recent weeks, and has gone so far to call it "the biggest corruption of American democracy in the 21st century", but in retrospect, one can also argue that the only modest success the Biden admin has had in the past year - namely bringing inflation down from a torrid 9% annual rate to "only" 3% - has also been due to the millions of illegals he's imported into the country.

We would be remiss if we didn't also note that this so often carries catastrophic short-term consequences for the social fabric of the country (the Laken Riley fiasco being only the latest example), not to mention the far more dire long-term consequences for the future of the US - chief among them the trillions of dollars in debt the US will need to incur to pay for all those new illegal immigrants Democrat voters and low-paid workers. This is on top of the labor revolution that will kick in once AI leads to mass layoffs among high-paying, white-collar jobs, after which all those newly laid off native-born workers hoping to trade down to lower paying (if available) jobs will discover that hardened criminals from Honduras or Guatemala have already taken them, all thanks to Joe Biden.

Tyler Durden Sun, 03/10/2024 - 19:15

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