Wolfgang Münchau, the founding partner of Eurointelligigence and former Financial Times columnist, argued that we were in a red alarm -level balloon and this time there was a risk of transmission to the crypto currency sector. You can review the explanations from this page in English.
Although it is thought that the crypto market is not yet large enough to shake the entire financial system, it is a major risk that stablecoins are vulnerable to macroeconomic shocks.
Crypto coins and balloon risk
The crypto has always been a difficult category for traditional investors because there is no clear method of calculating the underlying value.
Especially the breast coin market is based on speculative trading without any economic basis. Currently, the total breast coin market is about $ 80 billion, and half of this is Dogecoin. Even a coin associated with Donald Trump has reached a market value of $ 3.8 billion.
The breast coin balloon may not be large enough to destroy the global financial system, but it has already begun to show its effects. For example, in Argentina, the stock market depreciated over 5 %on the collapse of a breast coin introduced by President Javier Milei.
Stablecoin danger
Stablecoins offer a more robust business model because they are based on nominal money -supported reserves. However, these assets keep short -term government bonds as reserves and are very sensitive to fluctuations in interest rates.
If inflation rises as expected and the US Federal Reserve (FED) goes to interest rate hike again, the price of short -term bonds will decrease and the stablecoin reserves will melt.
The bond market crisis in 1994 began with the Fed’s only quarter -point interest rate hike. The 1997 Asian financial crisis was caused by the exchange rate regimes based on US Treasury bonds, similar to stablecoins.
In other words, what seems to be new in the financial world is actually re -packed of old crises in different ways. The Stablecoin crisis may be an example of a classic existence-existence incompatibility, and we have seen how this situation has created a crisis many times in the past.
Stock market and excessive valuation
Another danger sign is experienced in the stock market. The Nobel Prize-winning economist Robert Shiller is approaching the summit of all time for the S&P 500 index, the Cape-Cape ratio (Cape) calculated by Robert Shiller.
This ratio is currently close to 40 levels, that is, very close to the summit in the Dot-Com the balloon. Even before the 1929 and 2008 crises, it did not reach so high levels.
In the late 1990s, investors were right to approach the commercial opportunities of the Internet with excitement, but it was unclear which companies would succeed. At that time, Microsoft and Intel dominated the sector, Apple had a hard time, Amazon was just established and Google was not yet.
Today, there is a similar risk of over -valuation in technology and crypto markets. Balloons are often noticed when they explode, and this time the crypto market can also be part of the explosion.
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