Bitcoin and stocks are exploding, but why?

The American S&P 500 seems to be recovering today and climbing back above 5,000 points. The stock index therefore follows the Bitcoin price, which seems to be an unstoppable force at the time of writing. What’s wrong with this market? Why are risk assets doing so well right now?

“Buy every decline”

According to Julian Emanuel, chief strategist at Evercore ISI, the smart thing to do right now is to buy on any dip. “The clear lesson from what we have seen in the last few days is that you should not act on the basis of new economic data. If you were to trade based on the CPI data, you would be underwater again due to the recovery we saw yesterday. “If you look at the last 40 years, it’s especially smart to buy every dip,” says Emanuel.

Inflation in the US was higher than expected this week. This caused some uncertainty among traders because it means the Federal Reserve will not cut interest rates until later this year.

Normally that’s how it is bearish for the market, but this time the reaction was short-lived. The Bitcoin price fell briefly, but the digital currency is now trading significantly higher and we are even above $52,000.

In any case, the market has given up hope that the US Federal Reserve will cut interest rates in March. Even in May, according to the market, there is only about a 33 percent chance of an interest rate cut by the world’s most important central bank.

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No interest rate cuts, just increases

How is it possible that the market is doing so well while the chances of rate cuts are actually decreasing? That seems a bit contradictory.

One possible explanation is that the market recognizes that America’s national debt is in an unsustainable position. This means that the American government will have to take on more and more debt in the coming years to finance the existing mountain of debt.

The result is that more and more US dollars come into circulation. Perhaps we can view the recent rises in stocks and Bitcoin as the beginning of the flight into scarcity.

People sense that something is wrong with the traditional financial system and are trying to hide in the scarcity through Bitcoin, stocks and other investments.

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