Peter Schiff's warning for US economy
Peter Schiff, a well-known anti-Bitcoin economist, recently issued a stern warning that the United States has entered a recession. He predicted that inflation is about to surge, which will affect the Federal Reserve's decision to cut interest rates. The U.S. added just 114,000 jobs in July, the smallest gain since December 2020, well below expectations of 176,000 and down sharply from the revised 179,000 in June, according to the latest jobs data.
Additionally, the unemployment rate rose to 4.3%, the highest level since October 2021. Schiff expressed concern about the current economic situation, saying "the recession has arrived and inflation is about to spike." He also criticized the way inflation and unemployment are measured, noting that the "misery index" is higher now than it was for much of the 1970s. He added: "Bidenomics is a complete disaster and it's a shame the media isn't covering this."
Source: MacroMicro U.S. non-farm employment and unemployment rate
The poor employment data increased speculation about the Fed's next move. Some investors are now betting the Fed will cut interest rates by 50 basis points at its September meeting, instead of the 25 basis points previously expected. One user on social media also called on the Fed to consider a more aggressive rate cut, but Schiff warned that while a rate cut could trigger higher inflation, it would not necessarily help the economy or the job market. His comments underscore the Fed's delicate balance as it navigates these economic challenges.
Potential Cryptocurrency Market Impact
The recent rise in unemployment and slowing job growth may influence the Fed's policy decisions. A weak labor market may prompt the Federal Reserve to adopt a more accommodative stance and possibly cut interest rates to stimulate economic activity. This move could have a significant impact on various assets, including cryptocurrencies. Lower interest rates often make traditional savings accounts and fixed-income investments less attractive, prompting investors to seek higher returns in alternative assets such as cryptocurrencies.
In addition, lower borrowing costs can encourage more venture capital and institutional investment into the cryptocurrency industry. Enterprises and startups may find it easier to expand functionality and innovate, leading to increased crypto market activity and asset prices. According to the CME FedWatch tool, there is currently more than 68.4% chance of forecasting that the Fed will cut interest rates by 50 basis points at its September meeting. Additionally, the likelihood of three rate cuts in 2024 has also increased after recent employment data showed a cooling labor market.
Source: CME FedWatch currently has more than 68.4% probability of predicting that the Federal Reserve will cut interest rates by 50 basis points at the September meeting.
BlackRock and MicroStrategy’s Bitcoin Position Risks
In addition, Schiff also expressed his views on MicroStrategy’s purchase of 169 Bitcoins in the past month. MicroStrategy and BlackRock's Bitcoin ETF (IBIT) combined hold about 569,000 Bitcoins, worth about $36 billion, according to the latest data. As of now, the micro strategy holds 226,500 Bitcoins, worth approximately $15.06 billion; in comparison, the IBIT ETF holds 343,387.46 Bitcoins, worth approximately $21.7 billion.
Peter Schiff expressed concern over such large Bitcoin holdings by the two market giants. He believes that MicroStrategy may come under pressure from creditors and be forced to sell its crypto assets. Schiff noted that BlackRock's IBIT ETF could also be forced to sell Bitcoin if investors in the fund decide to exit to cut their losses.
Source: X Peter Schiff believes that MicroStrategy and BlackRock will eventually be forced to sell their Bitcoins
Schiff believes these losses are inevitable because he believes Bitcoin is worthless. Schiff noted that a German executive agency sold $3 billion of its stake a few weeks ago, driving the price down 20% in a month. If Schiff’s prediction comes true and BlackRock and MicroStrategy decide to sell their Bitcoin holdings, the market could take a bigger hit, as those positions are 12 times larger than the stake sold by Germany.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
