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US Fights Recession With ‘Closed-Door Sausage-Making’ – Can Bitcoin Triumph in a Global Recession?

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US Fights Recession With ‘Closed-Door Sausage-Making’ – Can Bitcoin Triumph in a Global Recession?

The US is struggling to admit that the economy is in recession. That’s despite a recent warning by the World Bank that the US, China, Eurozone, and other major economies are sharply slowing into recession with disastrous long-term effects on developing economies.

Given the controversy generated by its playbook to the 2007/08 recession, Washington may have chosen to make tough choices behind the cover of willed opacity. In the circumstances, Bitcoin’s safe haven promise has come into focus once again.

What role could the crypto asset play at a time of economic uncertainty?

US: ‘we are not in a recession’

A Reuters poll of economists and independent observations by top CEOs that the U.S could tip into recession next year concur with a World Bank report that the global economy is in its steepest slowdown since 1970.

Washington, however, has repeatedly dismissed concerns over the recession. “We are not in recession,” U.S President Joe Biden top aide told MSNBC on Nov. 3, on the back of positive employment data. “The economy is growing. It is strong. It is creating jobs.”

Earlier, press secretary Karine Jean-Pierre strongly dismissed concerns that the country is entering recession. “We are not…there are no meetings or anything like that happening in preparing for a recession…what we are seeing right now is a strong labor market.”

The White House’s determined refusal to acknowledge the elephant in the room may be a little too strong. It is hard to imagine that recession is completely off the agenda in the US. Based on the interconnectedness of a global economy that is taking an unprecedented beating this year.

America’s key trading partner, the U.K, has revealed that it is facing its longest recession since reliable records began in the 1920s. GDP growth is expected to decline by around 0.75% in the second half of 2022, and fall further over the next two years.

Unemployment will double to 6.5% during the two-year economic downturn, according to the Bank of England.

Unemployment is low, claims are so low, the economy is strong and so resilient and we see no recession they said during the summer of 2007 too.

What they say has no predictive value whatsoever. pic.twitter.com/9ztm2PUquT

— Sven Henrich (@NorthmanTrader) November 2, 2022

World Bank: ‘we are edging toward a global recession’

The World Bank report forecast an interconnected global downturn that will spill down to the global south. It says a global recession is already in the making as central banks have raised rates at a degree of synchronicity not witnessed in the past 50 years.

“Investors expect central banks to raise global monetary-policy rates to almost 4% through 2023 – an increase of more than 2 percentage points over their 2021 average,” said the report.

Bar the easing of supply disruptions and labor-market pressures, interest rate hikes could leave the global core inflation rate, excluding energy, at about 5% in 2023, it stated. That’s almost double the five-year average before the covid-19 pandemic.

“The world’s three largest economies – the United States, China, and the euro area – have been slowing sharply. Under the circumstances, even a moderate hit to the global economy over the next year could tip it into recession,” said David Malpass, the bank’s president.

Closed-door sausage-making

The Joe Biden administration’s overpromising tone in the face of contrary data by highly placed sources points to two potential reasons. One would be an isolationist certitude not moved by what is happening around the world.

Even if its economy was unassailable, it is surprising that inflationary responses by world central banks, a downturn of record proportions in the U.K, and a simultaneous slowdown in China and the Eurozone, would not rouse the US into alert mode.

Yet, Biden’s press secretary will have the world believe that Washington is not holding any meetings whatsoever. Another reason for the White House’s overpromising tone in the face of combined stresses could be willed opacity.

Officially acknowledging recession could send unexpected triggers through the markets. But the US cannot simply buy time or wish away the inevitable. It may simply have chosen to fight fire behind the scenes.

Source: Sven Henrich

Hilary Clinton infamously told a closed-door Goldman Sachs meeting that politics is like making sausage, according to leaked emails published by Wikileaks. There might be no takers if the public saw the process.

Following the 2008 recession, Barack Obama’s stimulus package was a case of unpalatable sausage-making.

Britain’s uncertain slouch into recession has already seen it going between three prime ministers in the space of a few months. The US democracy is just as fraught and polarized right now. Closed-door sausage-making is an option for Biden as long as he can manage it.

The Bitcoin alternative

Interestingly, Bitcoin (BTC) traces its roots to the angst of the 2007/08 recession. Founder Satoshi Nakamoto wrote about the bailout of banks, as yet concealed in the U.K, in the genesis block of Bitcoin 13 years ago.

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” wrote Nakamoto, the enigmatic pseudonymous creator of Bitcoin.

One of Bitcoin’s compelling use cases was the possibility of sheltering your finances from unilateral federal decisions. Like the controversial bailing out of commercial lenders using public funds after the subprime-mortgage crisis in 2009.

Another use case was Bitcoin’s potential to survive stressful times. Transacted outside the ambit of central bank policies and inflationary responses, BTC has been regularly discussed in the same breath with gold, particularly since the pandemic triggered fears of inflation.

Bitcoin’s correlation to gold has risen sharply over the past two years. Bloomberg commodity strategist Mike McGlone previously said that the crypto asset will eventually transition from a risk-on speculative asset to the crypto market’s version of the metal.

As digital gold, Bitcoin appeals to the cashless internet economy largely on account of its characteristics that include round-the-clock price transparency, and the lack of limits, interruptions, or third-party oversight.

Sovereignty from realpolitik

It is not yet sufficiently clear though, that Bitcoin can maintain its sovereignty from realpolitik. Global crises, including the Russian invasion of Ukraine, coincided with a dramatic fall in the value of Bitcoin, which hit a multi-year low of about $17,500 in June.

Heavy-handed policing of cryptocurrency by the US, in particular, in response to its potential for sanction-busting and geopolitical games, has also demystified the asset’s aura as a self-referential haven.

But Bitcoin can have its second 2009 moment by serving as a hedge to inflation and a safe haven for investors. The responsibility has to begin with the crypto community. Bitcoin needs to innovate in keeping with the cypherpunk values of Satoshi Nakamoto.

It should undermine increased invasions into its universe by nation-state actors, and evolve beyond its present correlation to the stock market. In this capacity, BTC is not only sensitive to economic data which shapes and ‘unshapes’ recessions, but also speculative tendencies.

Wharton professor Jeremy Siegel told a Bloomberg podcast this week that US stocks will rise between 20% to 30% over the next two years, and house prices will decline as much as 15% from their peak.

“Stocks are quite undervalued. If you buy stocks, in a couple of years, you’re going to be very happy,” Siegel explained, adding:

“If you’ve got that long horizon and you’re young today, this is a golden time. You’re not buying at the top. You’re buying near the bottom. You are going to be guaranteed great returns when you retire.”

Many crypto analysts argue that Bitcoin reached a bottom with its June lows. By the same measure, the digital asset could stand out during the predicted global recession, tracking the stock market, in line with Siegel’s forecasts.

Bitcoin’s self-reflexivity

The World Bank’s bleak forecast offers few prescriptions. Developing economies are encouraged to maintain foreign currency reserves. Gains from this will be only relative as destination currencies will likely have taken a beating too.

For individuals staring into the abyss, BTC’s quality as a safe haven comes into focus. Still, Marxist champions of digital freedom like Slavoj Zizek and Yanis Varoufakis have refused to romanticize Bitcoin.

They take exception to its use case as a means of speculation. Zizek is more reproachful to the self-referential nature of speculation in cryptocurrency, its apparent creation of exchange value out of nothing.

Ironically, the self-reflexivity of Bitcoin would be ideal now more than ever but even Zizek may have overstated things. The distance between Bitcoin and the fallible world of governments, central banks and real-life investments has been reduced.

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For BeInCrypto’s latest Bitcoin (BTC) analysis, click here

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All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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Bitcoin (BTC) Price Slips as US Labor Market Figures Hotter Than Expected

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Bitcoin (BTC) Price Slips as US Labor Market Figures Hotter Than Expected

Bitcoin fell 2% to around $16,800 after the Nov. 2022 U.S. jobs report revealed a strong labor market, despite the Federal Reserve’s six consecutive interest rate hikes in 2022.

Nonfarm payrolls increased by 263,000, beating the Dow Jones estimate of 200,000, while the unemployment rate matched expectations at 3.7%.

Jobs Report Signals Fed Hikes Are Likely to Persist

The gain in nonfarm payrolls came in slightly lower than the revised Oct. 2022 increase of 284,000, while average hourly earnings rose 0.6% compared to estimates of 0.3%.

The U.S. Bureau of Labor Statistics releases the nonfarm payroll and average hourly earnings at 8:30 E.T. on the first Friday of every month as part of the Employment Situation report.

While rising employment rates and wages generally point to a healthy economy, wages that grow too fast, especially in the presence of record levels of inflation, encourage the Fed to continue raising interest rates to ensure that the economy doesn’t run red-hot. 

“To have 263,000 jobs added even after policy rates have been raised by some [375] basis points is no joke,” noted Seema Shah of Principal Asset Management. “The labor market is hot, hot, hot, heaping pressure on the Fed to continue raising policy rates.”

Raising policy or interest rates cools economic expansion, but if done too aggressively, it could significantly curtail employment and pitch the economy into a recession. Recession fears generally create selling pressure on risky assets like cryptos and equities, driving prices into bear territory.

Cryptos ceded gains accrued earlier this week around a lower-than-expected Personal Consumption Expenditure Price Index of 0.2% for Nov. 2022. 

At press time, XRP was down about 2.5%, while DOGE fell 3.78%. Solana also declined by 1.1%. Equities markets also tanked, with the Dow Jones Industrial Average falling 0.9%, the S&P 500 1.2%, and the tech-heavy Nasdaq slid 1.5%. 

Crypto price heatmap
Source: Coin360

Elsewhere, gold is outshining Bitcoin as an inflation hedge and trading back at its price at the beginning of the year, $1,800 per ounce. By comparison, Bitcoin has fallen 63% in the same period.

Jobs Report and Inflation Still Likely to Influence Crypto Prices

The higher-than-expected Nov. 2022 nonfarm payroll number is the lowest jobs gain since April 2021, coming after a revised increase of 284,000 new jobs in Oct. 2022.

Nonfarm payroll increases in 2022
Source: TradingEconomics

The most significant adjusted increases in the nonfarm payroll were noted in the Feb. 2022 and July 2022 jobs report. The Feb. 2022 report revealed that nonfarm payrolls increased by 714,000 in Jan. 2022, prompting the Fed to step in with a 25 basis-point hike in March. 

The following four reports pointed to a cooling down of the labor market, which then picked up again in June 2022, when the Fed introduced its first 75 basis point hike of 2022.

On Nov. 30, Fed chair Jerome Powell noted that less aggressive rate hikes might be a distinct possibility at the next Fed meeting, although most analysts do not expect a drastic fall off from the last four increases of 0.75%. 

They predict that the Fed will increase interest rates by 50 basis points at the next Federal Open Markets Committee meeting in mid-Dec. 2022, taking the federal funds rate above the 4% mark. 

The Fed meeting will likely spark a rally in both cryptos and stocks if analysts’ estimates prove accurate.

For Be[In] Crypto’s latest Bitcoin (BTC) analysis, click here.

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All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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EU Parliament to ‘Vote on Adopting the Regulation on MiCA’ — Expert Says Industry Needs Legal Clarity

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EU Parliament to ‘Vote on Adopting the Regulation on MiCA’ — Expert Says Industry Needs Legal Clarity

In a recent statement, the European Parliament said its members would shortly “vote on adopting the regulation on markets in crypto-assets (MiCA).” According to the parliamentary body’s think tank, the envisaged regulations are expected to provide “legal certainty for crypto-assets not covered by existing EU legislation.” A crypto counselor, Paulius Vaitkevicius, said any regulation of crypto is likely to result in more capital and talent coming into the space.

‘Harmonized Rules’ for Crypto-Assets at EU Level

After months of discussions and negotiations which culminated in the June 30 preliminary agreement, the European Parliament (EP) is now set to “vote on adopting the regulation on markets in crypto-assets (MiCA).” The vote is set to take place during the legislative body’s plenary session. European leaders assert that the adoption of MiCA will lead to the creation of “harmonized rules for crypto-assets at [the] E.U. level.”

According to a Nov. 29 briefing by the parliament’s think tank, the harmonized crypto rules are expected to provide “legal certainty for crypto-assets not covered by existing EU legislation.” In the briefing, the EP also argues that the rules will not only enhance the protection of consumers and investors but will also “promote innovation and use of crypto-assets.”

Through MICA, European authorities also hope “to regulate [the] issuance and trading of crypto-assets as well as the management of the underlying assets.”

While European leaders like European Central Bank president Christine Largade are pushing for tougher regulation — MiCA II — some critics of the proposed legislation argue that the envisaged regulations in their current form may stifle innovation.

Legal Clarity Attracts Mature Players

Commenting on the European Union’s drive to regulate cryptocurrencies, Paulius Vaitkevicius, founder and crypto counselor at the law firm VILP Solutions, said the prevailing “Wild West environment” is not helpful to all parties. He also told Bitcoin.com News that without guidelines or regulatory frameworks “and with a number of situations where industry players collapse, we might end up in a situation where we will have only a handful of investors left in the industry.”

EU Parliament to 'Vote on Adopting the Regulation on MiCA' — Expert Says Industry Needs Legal Clarity

Therefore, to stop this from happening the crypto industry needs legal clarity, which according to Vaitkevicius, “bring[s] in more mature players to the industry from both project and investor sides.” Explaining why he is in favor of regulating the industry, Vaitkevicius said:

From my personal experience, such players have been seeking regulations and clarity already for some time and waiting for the right moment to step in properly. With regulations, we will see these firm steps and as a result additional capital and talent coming to the industry space.

Meanwhile, some crypto opponents have said if appropriate regulatory frameworks were already in place, Sam Bankman-Fried’s shenanigans would have been exposed much earlier. However, when asked about the validity of this argument, Vaitkevicius said the opinion that on paper FTX itself was “one of the most regulated players in the industry” undermines this theory. He added:

“Regulation is a good step forward, but [this] needs to be followed by other elements to be functional in real-life situations and achieve the pursued goals.”

What are your thoughts on this story? Let us know what you think in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Uzbekistan Approves Rules for Issuance and Circulation of Crypto Assets

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Uzbekistan Approves Rules for Issuance and Circulation of Crypto Assets

Uzbekistan Approves Rules for Issuance and Circulation of Crypto Assets

The authority responsible for crypto oversight in Uzbekistan has determined the order of issuing and circulating digital assets in the country. The main reason behind the move is to establish a mechanism that would allow local companies to attract capital through coins and tokens.

Uzbekistan Government Sets Out to Regulate Digital Asset Investments

The National Agency of Perspective Projects (NAPP), under the President of Uzbekistan, has released a new regulation on the procedures for the issue, registration, and release in circulation of crypto assets in the Central Asian Nation.

The document provides basic legal definitions for crypto assets and makes distinction between the different types. It introduces requirements for crypto issuers, depositaries and custodians and determines their obligations, including those concerning relations with customers.

The authority has also approved rules for the establishment and maintaining of an electronic register of crypto assets and adopted accounting standards for the rights associated with them and those of their holders.

Crypto depositories will be responsible for providing services for the issuance, registration, circulation, and storage of crypto assets. Issuers can use them or other electronic platforms, the NAPP said, pointing out that the nominal value of the coins must be expressed only in the national fiat, the Uzbekistani som.

The agency emphasized that the issuance of unsecured tokens is prohibited. Using words such as “state,” “state-secured,” “state-supported,” “Uzbekistan,” “Uzbek,” “national,” and “som” in the names of the cryptos is banned. The regulator also clarified:

The main purpose of the adoption of this document is to create a new mechanism for business entities to attract investments and develop their activities by issuing and registering the issue of secured tokens.

The NAPP further warned against any unauthorized activities related to the circulation of crypto assets in the country or the use of services by providers that have not obtained a license to offer them. The same applies to firms involved in the mining of cryptocurrency.

Uzbekistan has been taking steps towards the comprehensive regulation of its crypto sector with several decrees signed by President Shavkat Mirziyoyev and resolutions by the National Agency of Perspective Projects. The country recently licensed two companies to provide exchange services.

Do you think Uzbekistanis will benefit from the new regulations adopted by the country’s crypto watchdog? Tell us in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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