But are things really that bad?<\/p>\n
While the recent dip has been hard on some investors, it has actually created an ideal opportunity for new investors to get into the market at a place where they could see life-changing gains going forward.<\/p>\n
Let\u2019s take a look at what\u2019s going on in the world, how it is affecting crypto markets, and how it has created new opportunities.<\/p>\n
But before the good news, let\u2019s start with these simple definitions so that you know what\u2019s being discussed here:<\/p>\n
- \n
- Inflation<\/strong>, simply put, is an increase in prices.<\/li>\n
- Recession<\/strong> means that economic growth has slowed.<\/li>\n
- Bear market<\/strong> means that investors are, in a sense, hibernating as they see stock and crypto prices falling. They\u2019re holed up in a proverbial cave waiting for things to heat up again. (Technically a bear market is characterised by a 20% drop from recent highs.)<\/li>\n
- Crypto Winter<\/strong> is the term for a bear market in the cryptocurrency markets.<\/li>\n<\/ul>\n
Now, let\u2019s delve into current events so you can understand everything that’s going on in the world markets in a simple and straightforward way.<\/p>\n
What is going on with inflation?<\/h3>\n
There are at least three things that make prices go up:<\/p>\n
- \n
- Money printing:<\/strong> When governments increase the money supply.<\/li>\n
- A hot economy: <\/strong>Everyone has more money to spend.<\/li>\n
- Increased demand: <\/strong>Demand increases when people have more money to spend.<\/li>\n<\/ol>\n
When the economy is hot and the government gives out free money, more people can afford to buy stuff. In comes inflation.<\/p>\n
Prices go up \u2014 not just for consumer goods but also for stocks and other investments such as crypto.<\/p>\n
Currently, U.S. inflation stands at 8.3%. Here in South Africa, it\u2019s 5.9%.<\/p>\n
This means that, on average, what cost R100 last year now costs R105.90.<\/p>\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2022\/05\/South-African-annual-consumer-price-inflation-1.png\")
<\/a><\/p>\nWhat\u2019s unique about 2022?<\/h3>\n
Supply and demand for consumer goods are generally fairly constant.<\/p>\n
However, in 2022 there are at least two major supply problems.<\/p>\n
One is the Covid lockdowns caused massive supply chain backlogs.<\/p>\n
The other is that Russia and Ukraine are significant suppliers of energy (oil\/gas\/coal) and grain, two things everyone consumes directly or indirectly.<\/p>\n
With Russia under international sanctions and Ukraine exports being blockaded by Russia, the prices for these two commodities are on the rise.<\/p>\n
There\u2019s both a reduction in supply and an increase in demand at the same time.<\/p>\n
This causes a dilemma.<\/p>\n
What the world is seeing now looks like a rare combination of stagnation of growth and rising prices.<\/p>\n
Experts refer to this situation as \u201cstagflation.\u201d<\/p>\n
This puts governments and banks between a rock and a hard place.<\/p>\n
The current dilemma<\/h3>\n
Governments and central banks now have a choice to make.<\/p>\n
They can either tame inflation or they can boost the stock markets. But they can\u2019t do both.<\/p>\n
Raising interest rates lowers the price of everything including stocks.<\/p>\n
When things get this bad, the government will choose to lower inflation over boosting the stock market.<\/p>\n
This is because only a small percentage of the population owns stocks while inflation affects everyone.<\/p>\n
What is happening with interest rates?<\/h3>\n
In an attempt to tame rising prices while not dampening the economy too much, the U.S. central bank has raised interest rates by 0.5%.<\/p>\n
They have also suggested that they will do this at least a couple more times over the next few months.<\/p>\n
While 0.5% might not seem like a lot, it\u2019s the highest interest rate hike in nearly a quarter-century.<\/p>\n
Is there a recession on the horizon or is it already here?<\/h3>\n
As mentioned before, a recession is a period of reduced economic growth.<\/p>\n
Technically, it\u2019s characterised by two consecutive quarters (six months) of reduced growth.<\/p>\n
Should you be preparing for a recession?<\/p>\n
So far, the first quarter showed slowed growth.<\/p>\n
But there won\u2019t be a report on quarter 2 until later this year. Almost everyone believes that there will, indeed, be a recession (if it hasn\u2019t hit already).<\/p>\n
Former Goldman Sachs Hedge Fund Manager, investing guru and a mainstay of the crypto community, Raoul Pal, is predicting that rising interest rates will cause a \u201cnasty recession\u201d.<\/p>\n
In a recent Twitter thread, Pal suggests that demand is collapsing due to the \u201clargest monetary tightening in history\u201d.<\/p>\n
What does this mean for Bitcoin and altcoin prices?<\/h3>\n
Another term you\u2019ve probably heard lately is \u201crisk-off.\u201d<\/p>\n
In good times, the stock market is said to be \u201crisk-on,\u201d meaning investors are willing to make more risky investments. In times like these, it\u2019s \u201crisk-off.\u201d<\/p>\n
Investors move their money to safer bets such as real estate and gold (Revix has PAX Gold<\/strong><\/a><\/strong> listed as one of the products).<\/p>\n
These \u201csafe-haven assets\u201d offer just that, a safe haven for investors waiting to ride out the storm.<\/p>\n
They\u2019ve also gone digital so you can invest in gold through PAX Gold \u2014 it offers you all the benefits but none of the worries of storing the physical commodity.<\/p>\n
Cryptocurrency is currently correlated to the stock markets.<\/p>\n
When stocks go down, so does crypto. Although Pal says the crypto market is in \u201cfull panic mode,\u201d he also affirms that the bottom is near.<\/p>\n
It\u2019s important to point out that the price of Bitcoin isn\u2019t based on the health of the economy or corporate profits.<\/p>\n
With crypto, prices are the hook. When prices are plummeting people steer clear. And when they\u2019re on the rise, people want in.<\/p>\n
It\u2019s quite possible that Bitcoin and crypto prices could re-enter a bull market before the stock market does.<\/p>\n
Right now, crypto is in a consolidation phase, meaning Bitcoin price is hovering around $30k.<\/p>\n
It will have to break one way or the other to see whether or not the markets enter a Crypto Winter or a bull market.<\/p>\n
How does all of this affect you?<\/h3>\n
What\u2019s Pal\u2019s advice for crypto investors?<\/p>\n
He says that \u201copportunity comes out of crisis.\u201d<\/p>\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2022\/05\/Long-term-Bitcoin-chart-1.png\")
<\/a>Pal Tweets, \u201cIf you zoom out from the FUD (fear, uncertainty, and doubt) you get BTC\u2026 heading back to its long-term Exponential Moving Average. Tough times like these are the times to buy, if you have any spare cash (not easy these days).\u201d<\/p><\/div>\n
He points out that the high volatility in crypto markets is also the reason why they offer the potential for massive gains.<\/p>\n
He says the bear market gives long-term investors a \u201chuge opportunity\u201d.<\/p>\n
Looking at the charts over the past six months suggests the markets are in a Crypto Winter.<\/p>\n
However, if you zoom out over the past 12 years, Bitcoin and several other cryptocurrencies have seen stupendous gains.<\/p>\n
There was a similar situation with the \u201c.com boom\u201d and subsequent bust in the early 2000s.<\/p>\n
Many investors got burned and swore off risky tech stocks.<\/p>\n
However, those people ended up missing the best opportunities of the past two decades.<\/p>\n
If they had just left their investments in companies like Amazon, Apple, and Google, they would have seen some of the most biggest gains in history.<\/p>\n
The chart below shows this.<\/p>\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2022\/05\/NASDAQ-composite-index.png\")
<\/a><\/p>\nIf the current trend in the growth of crypto adoption continues, crypto could reach one billion users by 2031 \u2014 ten times what there are today.<\/p>\n
In other words, you\u2019re still early.<\/p>\n
The recent \u201ccrash\u201d actually presents an amazing opportunity to get into crypto at a great price and potentially see life-changing gains.<\/p>\n
In fact, investment bank JPMorgan says Bitcoin<\/strong><\/a><\/strong> has “significant upside from here” and that in their opinion, the fair price is 28% higher than its current level.<\/p>\n
They\u2019re also putting their money where their mouth is, noting that cryptocurrencies have overtaken real estate as one of the company\u2019s preferred “alternative assets.”<\/p>\n
Basically, \u201cKeep calm and carry on,\u201d says Pal.<\/p>\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2022\/05\/970x250-BTC.png\")
<\/a><\/p>\nIf you\u2019re convinced like Raoul Pal that the recent big dip in crypto prices is a buying opportunity, Revix<\/strong><\/a><\/strong> (a Cape Town-based crypto investment platform) is running a promotion designed to kickstart your crypto investment journey.<\/p>\n
Now you can invest fee-free in the original and crown cryptocurrency, Bitcoin<\/strong><\/a><\/strong>!<\/p>\n
Between the 22nd of May and the 21st of June 2022, Revix<\/strong><\/a><\/strong> users get zero buy-in fees on Bitcoin<\/strong><\/a>. <\/strong><\/p>\n
This is your opportunity to add your name to the Bitcoin<\/strong><\/a><\/strong> story. And if the plot so far is anything to go by, it\u2019s one you really want to be part of.<\/p>\n
About Revix<\/strong><\/em><\/h3>\n
- A hot economy: <\/strong>Everyone has more money to spend.<\/li>\n
- Recession<\/strong> means that economic growth has slowed.<\/li>\n