NPBFX corporate blog | The global speculative bubble is deflating

From 2019 until the onset of the global COVID crisis (February 2020), global financial marketswere in a phase of moderate strengthening withrelatively stable world trade, economies, and moderate central bank regulation. Everyone was still waiting for inflation to rise, while employment and economic data continued to improve. Things changed very quickly when COVID hit.

Global supply disruptions, cafe closures,restaurants and other businesses disrupted the normal functioning of labor and service markets. Consumers began to move into suburban and rural areas in droves to try to ride out the threat of the pandemic.
Central banks and governments have triedcope with the catastrophic consequences of COVID while addressing social and financial challenges. An unprecedented amount of stimulus, central bank financing and a range of other measures aimed at supporting the economy were implemented. As a result, speculative capital was released in a very short period of time.

The success of the global economy through 2020 has triggered a very deep and effective speculative market trend for 2020 and beyond.

Now this speculative bubble appears to be bursting - at least in certain areas of the markets.

As it appears,the increased overall volatility of financial markets will be exactly what we need to prepare for in 2022 and 2023 - perhaps this will last until 2025.However, despite all this, the economies of the US and other major world powers may not suffer all that much from this speculative deleveraging of the leveraged bubble.

Why?

The US experienced the collapse of the DOT COM bubble in 1999–2000years and the housing market crisis of 2008–2009. In fact, 2 serious crises in the last 30 years. At the same time, China/Asia has risen from mild obscurity in the 1980s and 1990s to extremely powerful economies. Along the way, in a relatively short period of time, one or two generations of the population have seen their assets grow by thousands of percent over the past 20 years. This has led to the formation of a highly speculative investment class of people - as some analysts say, it sometimes seems like everything this generation touches turns to gold.

But will it always be this way?

Bitcoin's recent rally and peak may alsois a consequence of injections of speculative capital. Will major cryptocurrencies deleverage? After Bitcoin's initial collapse in early 2021, it rose strongly again, as did the US markets - they recovered almost in sync, with inflation starting to rise later towards the end of 2021. We are now seeing a strong pullback in Bitcoin and the interesting thing is that it started at the same time that large Chinese real estate developers and other corporations are starting to experience serious credit/debt problems.
Is there a correlation between Chinese/Asianconsumer/economic power and Bitcoin? Has the rise in Bitcoin prices since 2015 been fueled by growing speculative and investment trends in China/Asia?

We'll find out soon enough.

If global markets continue the processa speculative reduction in leverage, we will see a sharp increase in volatility and more striking price trends before this process ends. Obviously, there is a huge amount of large loans / debts that are now experiencing difficulties in certain regions of the world. This type of speculation tends to drive the FOMO (fear of missing out) and YOLO (you only live once) mentality. As an example, let’s remember that after the DOT COM bubble burst, a fairly large group of investors who were used to living inside the bubble simply did not see it deflate, and they bought throughout the collapse - believing that everything will quickly return to normal. As a result, they lost everything they earned, and even more!

2022 and 2023 are sure to be great years fortraders. Sectors of the economy will “rotate” (capital will flow quickly from sector to sector) and create good fast trends. The world's strongest economies will “rotate” and create trends. Increased volatility will create risks, but will also create incredible profit opportunities.

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