Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Raoul Pal believes that central bank balance sheets are coming back into play and cryptocurrencies will perform well, and the crypto winter that many have been waiting for may not come.

Hi, I’m Raoul Pal, CEO and Co-Founder of Real Vision. Today, I will be speaking with you as CEO and Founder of Global Macro Investor. We are now in an extraordinarily complex world, facing the most severe supply shock since World War II, coupled with the global spread of the epidemic, and we can’t help but wonder if there will be a recession in the future.

Over the next two weeks, Real Vision will be inviting leading analysts and money managers to join the conversation, including hedge fund manager Dwight Anderson, oil trader Pierre Andurand and ARK founder Cathie Wood. Together, we will discuss key topics and exchange views and perspectives.

Next, I will share my own views with you with the help of a wealth of information and graphs. The first problem is inflation. From the chart below, we can see that the current inflation rate is 8%. It’s hard for us to understand why such numbers are present in a clearly deflationary world, is it because too much money is being printed?

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

I’ve covered this in detail in other Real Vision articles, and have written a lot about inflation in Global Macro Investor and Macro Insiders. My point is that the persistent inflation in the 1970s that you see on this graph was actually caused by demographic change, the massive population growth of the baby boomers, which triggered a demand shock. Meanwhile, the Arab oil embargoes of 1973 and 1974 and the Iran crisis in 1979 also triggered supply shocks.

But today is different, with the Covid-19 pandemic causing a supply shock. A large number of factories closed and goods stopped, and people had to obtain raw materials and commodities at higher prices, so people stopped investing in commodities. So even now that the world is reopening, we don’t have enough capacity to produce goods at scale. In addition, the Russian-Ukrainian conflict has further exacerbated this trend. Next, I will share with you the future development of our inflation, and the impact of low growth and low inflation on investment portfolios, the world economy and asset markets.

The graph below shows the year-over-year rate of change in commodity prices. Although the inflation rate is on the rise, the commodity inflation rate has been declining rapidly recently and will be reflected in the CPI. The graph shows the year-on-year changes of all commodities, but the ones we have been concerned about are actually food commodities.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

People have been talking about global food shortages and I may not have time to cover that in this video because it takes a lot of time to investigate, but I’ll be discussing this with Dwight Anderson in a future video. In my opinion, there will definitely be some shortages of food, and it may depend on whether the West will use it as a weapon against Russia, or whether the flow of food can be guaranteed. Today, the year-on-year rate of change in food prices has declined, but that does not mean that the CPI will also decline. On the other hand, the global food supply is also beginning to return to normal. However, China’s current policy still brings a lot of variables to the world economy, because we do not know how long its closure measures will continue, and whether the shutdown of ports will affect the global supply chain.

Now turning our attention to the US, the chart below shows US railcar loadings. From this we can see that the loadings have dropped significantly year-on-year, which indicates that the ISM will be well below 50, although the specific situation will be analyzed later.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

ISM means the Institute for Supply Management Survey Index, which can reflect changes in GDP to some extent. If the ISM index is below 50, then the US economic growth will be around 1%. Once it reaches 47, it indicates that the economy has stalled and is close to a recession. Changes in railcar loadings have indicated that ISM is trending lower, while transportation problems have been alleviated. In my opinion, the growth trend of the U.S. economy will slow down as the rate of aging of the population and the rate of debt increase, accompanied by a decline in the rate of inflation.

The next picture is the ISM stock chart, and you can see that stock levels have remained high. Inventory can be sold if demand slows. The graph below it shows ISM vs. ISM New Orders minus Inventory, which is also a meaningful metric. From this we can see that inventory levels are too high compared to new orders. Over time, we will see a liquidation of inventories, which suggests that the ISM will be below 50. Now, this trend has not been reversed, and may continue. And, we’re not sure if we’re heading for a recession or a growth shock.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

My core assumption has always been a growth shock because it’s easier to predict than a recession. But as you’ll see, there are plenty of signs that a recession is likely. Either way, it’s going to change the structure of markets and the way we think about things, not the least of which is inflation.

Inflation is actually affected by demand, and if demand decreases, commodity prices will fall. The next graph shows the proportion of inventory in new orders and how it relates to CPI. As you can see, CPI has been surging recently due to the war and supply shocks, while US inventories and new orders have been falling.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

This trend suggests that inflation is about to turn around. We saw a similar situation in 2008, when oil prices hit $140 a barrel, accompanied by a sharp rise in soft commodity prices, very similar to today. This is mainly affected by the growth in Chinese demand, which is a demand shock rather than a supply shock.

Now, if you look back at this graph, you can see that in 2008 we experienced the same thing, inventory in new orders went down and inflation went up. I think that’s also happening now, and the price paid by ISM, which is what manufacturers pay for their products, has started to come down.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Right now, it’s still in a volatile range, not at a worrisome level, but it’s already telling that we’re going to see a moderation in the CPI. The peak in CPI readings is expected to come around June, after which the CPI will stabilize.

I think the CPI is likely to be lower than the market expects, mainly due to demand destruction. At the same time, and this is something most people realize, they tend to just focus on the supply equation and assume stable demand.

If wages don’t rise and companies don’t sell prices, the higher costs will trigger demand destruction, and the higher part will act as a kind of tax on consumers and businesses. The chart below is the price of gasoline in the United States, which has seen an astonishing increase recently. Not only that, but the prices of a range of goods, including food, have risen. That means people will have to spend more on basic goods and services, and less on everything else, and some restaurants have gone out of business.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The graph below is from Alpine Macro, who constructed a growth tax based on the U.S. dollar, oil prices, and interest rate levels, and compared it to the ISM. Recent developments are worrying, with the ISM at risk of falling to 42, triggering a full-blown recession. While the data is still fluctuating, a recession is already starting to show, and people are not prepared for it.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

China’s credit impulse over the past year has had a dominant impact on the world economy. Although China has been tightening credit and experiencing recession, it can still lead the world economy, which also points to a full-blown recession in the United States.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Europe’s economy is already on the brink of recession due to inflation. They are grappling with energy issues and will experience periods of high prices for an extended period of time. Of course, these are all sacrifices that must be made in extraordinary times.

The figure below shows the year-on-year change chart of the Economic Cycle Research Institute (ECRI). We can see that the index has been falling sharply recently, approaching zero, and there is still a possibility of further decline in the future. But the good thing that the graph shows is the year-over-year rate of change, and we’ve been in a growth phase as far as the index itself is concerned. This suggests that maybe we won’t experience a recession, or maybe we’ve already had a growth shock, which generally follows a recession. If the ECRI doesn’t drop any more, then we may really have entered a plateau, which will be seen in the next six months.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The graph below shows residential fixed investment as a percentage of total fixed investment. Most of us are stuck at home during Covid-19, so we started decorating our house and replacing old furniture. This also increases the share of residential fixed investment, which in turn boosts the ISM index. However, this growth is now receding, as evidenced by multiple forward-looking indices.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Next, we can look at the changes in the mood of small businesses in the United States and many countries around the world. Some small businesses were forced to go bankrupt during the new crown, but fortunately, the country introduced tax cuts in the later period, which helped some small businesses to tide over the difficulties. And now that tax breaks have ceased, costs are rising, and that optimism is fading. I expect this sentiment will continue to decline in the future, and ISM will follow.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

But it’s even more worrying when I look at family sentiment. Savings are dwindling as the cost of living rises and fiscal measures are lifted and people can’t cope with the high cost of credit. In the long run, the consumer economy will become more and more sluggish.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Similarly, this situation is playing out in countries around the world, and the high cost of living and debt is unbearable. For example, as can be seen from the chart below of the year-on-year change in real income in the United States, people’s real income has fallen to the bottom, and the rate of inflation and wage increases cannot fill this gap at all. Our labor force participation rate has been declining for decades due to demographics. I’ve talked a lot in the Retirement Crisis video and many others, and have written a lot about this issue over the years.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Even with wage increases, aggregate demand in the U.S. economy has not increased. People tend to only see increases in the amount of wages and fail to notice that real wages are still negative. Moreover, only about half of the population has increased wages, and the remaining half are either unemployed or have no wages. As a result, the U.S. economy experienced no net growth at all in terms of aggregate demand.

Another serious issue is the explosive increase in mortgage rates, as we can see from the chart below we just experienced the highest level of mortgage rate increases in history. Obviously, this is not a good thing, and it has also led to a decline in fixed investment in family homes, which in turn has led to economic weakness.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

This graph from TopdownCharts is a great chart showing how mortgage servicing costs compare to ISM. From this we can see that the ISM is facing the risk of a sharp decline, which suggests that the future growth of the economy will be slower than everyone expects.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Goldman Sachs has issued a year-on-year change in the financial condition index, from which we can see that with the gradual tightening of financial conditions, such as credit spreads, the ISM will also drop to around 50, and economic growth will also be significantly affected.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The next graph shows that the PPI, the producer price index, or the price at which manufacturers pay for raw materials, has risen a lot. The data in this graph is inverted and provides projections for the next 18 months.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

From the graph we can see that the PPI will continue to rise for the next 18 months, which indicates that the ISM will collapse on the basis of the price increase. This is largely due to shrinking profit margins, so companies are slashing spending and buying less commodities, thus moderating commodity prices. So I started looking at where the price of oil was going and thinking about the impact it might have.

The problem is, I made the video on April 25th, but you don’t see it until a week later, and the price of oil may have changed a lot in between. But I’m not talking about short-term moves here, I’m talking about whether oil can come back down to $70. In my opinion it is possible, and the fall in oil prices will also lead to a fall in the CPI.

The same phenomenon is also seen in European and Asian countries, and now the economic indicators of most countries in the world are declining, which has also caused the global manufacturing PMI to decline and enter recession levels again. Among them, the United States is even a little better than other countries due to the continuous strengthening of the dollar.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Markets are also excellent at predicting business cycles, which is why asset prices move. Based on this, I built my investment framework that incorporates factors such as long-term cycles, debt, demographics, deflation, globalization, technology, business cycles, and more. After building such a framework, we can analyze the direction of asset prices. The following picture is a comparison of the S&P 500 index and the ISM index. The trends of the two indexes are surprisingly consistent, because stocks and assets, like assets, are cyclical.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The S&P 500 is around 4200, which means the ISM will drop to 50. The S&P 500 could be down 10% to 15% for some time to come, and that would mean the ISM would be below 47, a sign of a recession.

While the stock market has been in decline, people seem to be more concerned about the speed of change, and the cyclical changes in the dollar also play an important role. When the dollar rises, the business cycle falls; and when the business cycle falls, the dollar rises again. People have been paying attention to changes in interest rates, but in fact interest rates are only one factor that affects the value of the dollar. Capital flows and mergers and acquisitions are both important factors affecting the dollar. Among them, the business cycle is highly correlated with the U.S. dollar.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

I often say that bonds are the truth, but now, in an unprecedented way, bonds have coincided with the ISM trend. Often, they tend to provide some forward-looking information. The current situation may come from changes in the situation in Russia and Ukraine, and the market is still reacting to it.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The situation in the 1970s was very similar to what we have now, when the Arab oil embargo pushed up the price of oil, as is the case in Russia now. Likewise, the CPI index rose rapidly, jumping from 3% to 12%. After that, the global economy stagnated and ISM fell to an all-time low as demand collapsed as it was unable to cope with supply shocks.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Bond yields tumbled again, but later rose again in the late 1970s because of the supply of Iranian oil. But unlike now, when baby boomers flooded into the labor market and stimulated demand, now our demand is growing, and there will be no more cliff-like rises.

Then I’ll discuss commodity supply with Dwight Anderson and Pierre Andurand. I think their view is that the supply issues for commodities will lead to demand destruction and a recession, while technology and investment in the industry start trying to build additional capacity.

Right now, everyone is concerned about the Fed’s next move. They have improved by 25 basis points, but it is not enough, they need to improve by 11 times. However, the bond market already does this for them, so we don’t need a central bank. Now that the cost of capital is rising all over the world, and rising mortgage rates have greatly increased the cost of debt, no one cares about the Fed funds rate.

Even so, the Fed has its own balance sheet, the white line and the area shown inside the square. During these periods, the Fed’s balance sheet was relatively stable and there was no quantitative easing. In 2010, the Fed suspended QE, so yields started to fall, then they restarted QE and yields went up. In 2011, the Fed stopped QE again, causing bond yields to plummet.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

After that, out of fear of the financial crisis, the Fed began to stimulate the economy again. By 2015, they once again suspended the corresponding policy, and yields began to fall. After that, the Fed began to adopt quantitative tightening policy, so yields experienced the last period of rising. Then at the moment QT starts, bond yields completely collapse and the economy begins to head into recession. We’re going to be in a recession in 2020 with or without Covid, and the virus is just an accelerator, which is one of the reasons I’m long bonds in 2019.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

For now, bond yields have been negative, a phenomenon not seen earlier in the economic cycle. This shows that we have entered a decline cycle ahead of schedule due to rising commodity costs and the impact of massive monetary tightening. In the future, I will be talking to friends who agree with me or the opposite and hear what they have to say.

Every time the Fed raises rates, the yield curve goes down, and every time the yield curve crosses zero, there is a 100% chance of a recession. Of course, nothing is certain in the world, but from the evidence we have so far, the probability is quite high.

My guess is that for the next decade, we may be running negative real rates, as is the case in Europe and Japan. While real interest rates are now positive, markets are unraveling and growth is slowing. So, real interest rates need to be much lower than where we are today, but there’s also no consensus. The graph below is a graph of the 10-year U.S. Treasury bond yield, which I call the “truth map.” Whenever we reach the peak of yields, the economy enters a recession. Also, the maximum value of each cycle is lower than the previous cycle, and the current interest rate is about 3%.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

In my technical analysis work, I use a lot of DeMark’s material. These data suggest that bond market yields are poised to peak at any time, and may reach a rolling peak in the next few months, which will also be a mid-cycle peak in interest rates. We’re going to have a short, sharp cycle that hasn’t happened for a long time before the Greenspan era, and I’ll get to that later.

A lot of people have said to me that we are going to have serious inflation. But I think we’re heading for demand destruction because we’re in a very similar situation right now to 2018. At the time, economic growth was slowing down, and I started paying attention to the bond market and made a fortune in 2019. There may be a similar situation now, but it may be more urgent and faster, and it is difficult for me to say the specific situation.

When we start rebuilding supply chains and factories, it drives up demand and drives up inflation. Fixed investment has been lagging in recent decades, and now these rebuilds can once again stimulate the economy, pushing up prices for things like cement and copper. At the same time, wages have risen at the expense of profits. Many people think that wages will continue to increase, and the transfer from capital to labor is actually an ongoing trend.

The latest fiscal policy will also lead to higher inflation, by 3% to 4%, and bond yields will also peak at 5%. Different people have different opinions on this, and no one knows the exact answer. But I think we are in a very similar form now to the 1940s, not the 1970s. We’re going through the Fourth Turning, and I recommend you read The Fourth Turning by Neil Howe and William Strauss.

In the United States during World War II we formed a unified global order system and financial system, and now with demographic changes, these systems will start to diverge, and no one knows what the future will look like. After World War II, as global demand increased, we had the largest supply shock the world has ever seen, followed by rapid price increases. After that, the inflation rate then fell back and stabilized for a while due to changes in demand. Financial repression has limited the rise in interest rates and kept inflation around 3%, eroding the value of debt over a 15-year period without making it a problem.

During that period, everything was being rebuilt, and there was a massive fixed-asset investment boom, with factories, houses, roads, and cities built. Then the population exploded, and the arrival of baby boomers ushered in an unusual period. But if you tell people that we are in a situation similar to the 1940s, people will not buy it, because today’s inflation is rising and the market environment is bad. It is not the kind of technology that took off then, economic growth, debt reduction, and living standards. state.

At the time, though, yields didn’t explode, but hovered between 1% and 3%, which is what we need to work on. In my opinion, we should follow the wave of technological development, adjust the global economic structure, and stabilize the inflation rate. Commodity prices will trend lower in the long term as technology develops, which will also offset supply chain issues and some of the structural issues. At present, we do not have excess demand for commodities, but it is growing normally. The commodity market will also be in a bull market for a long time, and there will be no extreme changes.

This will inherently reduce inflation and over time supply issues will be resolved. Now the situation in Russia has brought a lot of uncertainty to the world economy. Should we transfer investment and what are the ways to deal with it? Although I cannot answer these questions, I believe that the international community will be able to get along well with the solution.

In the next decade, the situation will change as India and the Middle East have a younger population. But before that, we should look at the investment in the domestic supply chain. For example, in Elon Musk’s factory, the number of workers is very small, and it is replaced by robots and artificial intelligence. This is also the future development trend – replacing the labor force in China, India and other countries with robots is also an effective way to solve the aging population and the decline in labor participation rate. Although the process is very difficult for people without transferable skills, artificial intelligence has entered people’s lives and is an inevitable trend.

In the coming period of time, the demographic structure will continue to deteriorate, the aging of the population will intensify, the labor force will leave, and the willingness of young people to have children is generally sluggish. The population growth of the United States is best to remain stable in the next 20 to 30 years, but it is also likely to experience negative growth like other countries, including China, which is now beginning to experience negative population growth. If this trend continues, it will be difficult for economic development to be driven by wage growth. On the one hand, technological development will reduce costs, and on the other hand, retirees will accept lower wages because of their pensions.

Let’s look at the graphs from the 1940s and 1950s, when we had a massive supply shock after World War II. The shock lowered demand and pushed inflation into negative territory for a while, before the world economy began to rebuild and inflation climbed again. From this chart, interest rates have not risen substantially, and real interest rates have reached negative values.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

As the S&P 500 shows, negative real interest rates are better for the stock market. During that time, we had supply shocks and financial repression, and the stock market was up 700%.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

In the 1940s and 1950s, inflation fluctuated because monetary policy was not as widely used as fiscal policy. Now that fiscal policy is king, we have found a new tool, direct transfer payments, which I think Europe will use to offset the impact of the war in Ukraine on commodity, oil prices. Unlike previous sweeping stimulus packages, Europe will send checks directly to households and businesses this time around. But the problem is that if we don’t consider the use of monetary policy, interest rates will remain around 0 and the US will not exceed 1.5%.

Until the Greenspan era in 1987, the economy had been cyclically fluctuating under fiscal policy. After entering the Greenspan era, we began to adopt monetary policy to reduce this volatility, and the economy began to flatten. At that time, people helped to build up debt by lowering interest rates, thereby offsetting the volatility of economic development. However, when the debt collapsed, this approach no longer worked. So we started using central bank balance sheets, but this fiscal policy further contributed to the instability of the economy.

Below is a graph of US GDP going back to 1947. You can see that GDP growth was more subdued during the Great Moderation. GDP has been falling continuously, you can see the trend rate, it has been falling since the 1970s. But we also find that GDP is becoming less volatile. As for the GDP after 2020, there will be big fluctuations, and we can wait and see the future trend.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Let’s talk about interest rates and bonds, which have had the biggest sell-off in my entire career and one of the biggest in history in terms of U.S. monthly total returns. We’re back where we were in the 1970s, and while not a re-enactment of that era, the scale of the sell-off is also unprecedented.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

I’ll go into more detail about the bond market in Global Macro Investor and Macro Insiders, but one thing is for sure, looking at the bond market, everyone hates bonds and everyone is an inflationist. Over the next few weeks, I’ll also be talking to a lot of people about their perspectives and working with you all to address these issues.

The chart below shows the changes in the Nasdaq 100 from 2009 to 2010. In 2010, we stopped the first quantitative easing policy, so the market sold off, and the stock index showed a “W” shape change. And when it became clear that central banks would continue to pursue quantitative easing, stocks experienced another rally.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Let’s take a look at 2015 and 2016 next. This time around, the Fed started preparing to raise rates and in 2016 announced that they would raise rates four times, by 25 basis points. However, the Fed was forced to stop after one rate hike as markets crashed and economic growth slowed again in a “W”-shaped swing. When the situation became more serious, the Fed stopped raising interest rates, and the stock market ushered in a new round of gains.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The situation in 2018 was more similar to now, when we had quantitative tightening, and there was a rise in interest rates, and the yield curve went all the way into negative territory. So the Fed responded with a Powell shift.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

In the Powell turnaround, the stock market took off again. Given the evidence already given, I don’t know why this won’t happen again. Many of you will say that inflation would be higher this way. In 2008, when they proposed cutting policy, inflation was at its peak. Cyclical inflation always lags, especially core inflation.

If inflation lags and forward-looking growth indicators fall, then I think the Fed is likely not going as far as people think, and the bond market will follow suit, and the stock market is a huge buy point. The recession predicted in 2018 isn’t here yet – but let’s assume a recession is coming, which I think may not come until 2023.

But if a recession comes, the market typically falls 30% in a recession, which is the average over the past 30, 40, 50 years. But central bank balance sheets have a far more profound impact on the economy than a recession. In the event of a recession, the Fed will print money, causing real interest rates to fall and stocks to explode. And they’re pretty much oversold. Below I’ll explain using Amazon as an example, a stock that reflects network effects that has been rising according to Metcalfe’s Law. Whenever an S-shaped curve occurs, it means that the market is not sure whether Amazon will survive. In 2014, Amazon’s stock fell 30%. Whenever a sell-off occurs, it goes into oversold by one or two standard deviations.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The picture below was provided by my friend Northman Trader, which Sven pulled out recently. This is the National Retail Investors Association index and people have never been more bearish. A further market meltdown, while the possibility of entering the structural bear market everyone fears is very unlikely, is possible.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

That’s my whole macro framework, it’s not just one or two data points, it’s the confluence of thousands of charts that Remi Tetot and I have accumulated over the years. Based on this, we have established such an in-depth and comprehensive cyclical and structural framework.

Changes in the U.S. dollar are closely related to the Financial Conditions Index. As the dollar rises and financial conditions tighten, both ISM and growth rates fall. So I’ve been emphasizing that we need to focus on the dollar, it’s a very critical variable.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

I am currently shorting the euro, and the chart below shows the 40-50 year trend of the euro. Some might say that the euro didn’t exist in the early years, but this graph is the best forecast based on Bloomberg data. Today the euro is going down and I’m worried it could go to 80 or even 70 cents, I’ve been short the euro since 2011.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Next is the yen, the world’s largest saver, and its behavior of controlling yields and printing money to buy bonds will keep the yen lower, and even if inflation eases, it may not improve much. If USD/JPY rises to USD 200, it will be a relatively big shock to the world economy and will lead to reallocation of capital.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The next chart is the trend curve of gold, which has performed well under negative real interest rates and has a certain forward-looking outlook on growth. Although it is not trading smoothly now, I feel that if global growth slows down in the future, gold is bound to go higher, so we will continue to pay attention to its dynamics.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Finally, let’s take a look at Crypto. As shown in the chart below, the number of Crypto users is constantly surpassing the number of Internet users and is growing at an average annual rate of 165%, compared to the Internet’s 85% growth rate over the same period. This is enough to see that Crypto is the fastest adopted technology ever.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

By 2030, the number of Crypto users will reach 5 billion, and the era of the Internet of Value will be fully opened. The next billion users will appear in 2024, and the growth rate of new users has been slowing, not as amazing as it used to be.

The next graph compares the growth forecasts of Crypto and Internet users in a more intuitive form. Let’s assume that from the sixth year onwards, the Internet will grow at a rate of 43% per year, so in the tenth year it will reach 5 million users. If Crypto grows at the same rate, the number of users will reach 120 million in the tenth year. But if Crypto maintains its current growth rate of 76%, the total number of users in the tenth year will reach 2.8 billion. Regardless, the growth will be explosive.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

However, in the short term, the year-over-year rate of change in Crypto’s total market capitalization has stopped growing, and it has also experienced a period of bear market. But I think central bank balance sheets are coming back into play and Crypto will do well. I know a lot of people are looking forward to Crypto winter, but I don’t think so.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

We need to keep an eye on the economy, if inflation falls, Crypto will rise. The picture below is the total amount of Crypto. It can be seen that it has been trending sideways, which will also lead to sideways.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The figure below is a logarithmic graph of Bitcoin using the regression channel. Bitcoin has achieved a standard deviation oversold, which is also the largest oversold Bitcoin has ever seen. This suggests that we should all be buying rather than selling, as it has little chance of going lower. We’re all waiting for that inflection point, maybe ETFs, maybe ETH 2.0 staking, because that’s going to change the dynamics of the entire market. And if inflation goes down and growth goes down, then you need to have a long-term asset like Crypto.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

The chart below is a recent price chart of Bitcoin, which has been fluctuating in a small range. Generally speaking, a sideways movement means a substantial increase. Although we are not sure whether the price of Bitcoin will go lower, I actually don’t care too much about it, because I still pay more attention to her long-term development trend.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

I am more bullish on ETH than Bitcoin. Over time, we should see ETH significantly outperform Bitcoin. In recent times, Bitcoin has continued to do so even as it sold off.

Real Vision founder: The turbulent situation and the encrypted economy will quickly overtake the Internet

Today I will talk about this first. There are still many things that I have not covered today. Later, I will invite elites from other fields to discuss it together. I also hope that you will continue to pay attention, learn more from it, and find new opportunities. We live in a difficult and complex time, but we can always find a way to navigate it, and good luck to you all.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/real-vision-founder-the-turbulent-situation-and-the-encrypted-economy-will-quickly-overtake-the-internet/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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