Jay Powell remains calm about the US economic outlook, despite the Fed holding interest rates steady and acknowledging signs of a cooling economy. US economic data has disappointed since May, with full-time employment declining and credit card delinquencies rising. Recent economic growth has largely relied on government spending and public sector jobs, while consumer spending has outpaced income.
Leading economic indicators and the market are signaling recession risks. The Fed may have been too slow in cutting interest rates, leading to excessive demand restraint. Economic momentum loss could quickly become a self-reinforcing spiral, increasing unemployment, delinquencies, and bankruptcies. Recession warnings are flashing and should not be taken lightly.
Geopolitical turmoil in the Middle East also contributes to market anxiety as retaliatory actions in the region could impact overall market sentiment. The upcoming US presidential election in November adds to this uncertainty. Cryptocurrency market sentiment is further unsettled by large Bitcoin movements from MtGox and the US government, following a price drop due to the German government's net selling in June.
One fundamental indicator based on historical price data, the Pi Cycle, with 111 and 365x2 moving averages and the (MA365)x2/MA111 oscillator, has confirmed a similar downward momentum to late 2020. While historical patterns do not guarantee future outcomes, warning signs of a potential downturn or prolonged sideways movement should not be ignored.
Based on the 4-year cycle and STH Realized Price and Realized Price data, preparing for unexpected developments is essential. For instance, during the significant downturns from October to December 2019 and May to July 2021, Bitcoin prices dropped to the Median RP area before recovering and reaching new highs. While there is no guarantee of absolute accuracy, being mentally prepared for unexpected developments is always necessary.
Written by BinhDang
