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Global Uncertainty

The Market Trembles Under Global Uncertainty

The market wavered under global uncertainty. The all-time high inflation and mounting geopolitical tension took the stocks down, and the crypto markets faltered.

On the verge of collapse

US inflation hits a record 40-year high and takes down stocks and Bitcoin.

The US dollar lost its value at an increasing rate, and the Consumer Price Index (CPI) increased 7.5% this month, the highest surge since 1982. The Federal Reserve indicated that almost zero interest rates would rise soon with costs climbing high owing to the ongoing supply chain crisis and pandemic-era stimulus programs. As a result, Wall Street expects a 1.75% increase or more by year-end. Of course, the markets reacted with churn, but the long-term effects are harder to predict.

Bitcoin experienced a shaky note this week. The cryptocurrency developed to defy inflation spiked last Thursday to $45,800 for a short time on the CPI news. However, other headlines were not received with much enthusiasm. Geopolitical tension between Russia and Ukraine pushed BTC below $43,000, and as the tensions have risen and fallen over the last several days, Bitcoin somewhat settled in the $44,000 range Tuesday.

Last month’s signals point towards a rise in interest rates in March, but it is not that simple since a sudden rise in interest rates will loom as a threat to economic recovery. The Vice-Chairman of BlackRock argued that central banks have no option but to live with higher inflation as the cost of the economy will be too great if they increase interest rates.

Ethereum’s founder and Russian-Canadian programmer Vitalik Buterin tweeted, “An attack on Ukraine can only harm Russia, Ukraine, and humanity…”. With markets remaining unstable, Bitcoin donations are heaping to support Ukrainians facing the looming Russian aggression.

However, it seems that the world’s largest asset manager, Vitalik Buterin, is doubling down on crypto. Following the blockchain strategy lead in June, crypto trading is next for BlackRock clients. In January, BlackRock filed for a new ETF creation focused on companies developing blockchain and crypto tech. The firm also owns the largest shares in MicroStrategy, a publicly-traded company that holds about 125,000 BTC in its corporate treasury.

The mounting geopolitical tensions, supply chain woes, and soaring inflation could have a long-term impact on markets. However, the more optimistic view would be that these developments will test Bitcoin’s utility as a fixed-supply currency that cannot be altered by any person, company, or government. The proposition is supported by smart money right from BlackRock to Bill Miller, who referred to Bitcoin as insurance against financial catastrophe.