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WORD OF THE DAY: Volatility
Are you prepared for a rise in volatility? It is common for markets to become more volatile as a bear market deepens. As uncertainty, illiquidity and impatience increase, more market participants begin to expect market extremes. Either the market bottoms out and a new bull cycle occurs by his one Fed pivot, or limits are lowered and a margin closeout date is imminent. Bankruptcy of Credit Suisse. Everyone is at stake to give some kind of signal after every major market move. The price range begins to widen, and weekly or monthly movements are condensed into his daily action.
Arguably one of the greatest investors of all time, Stanley Druckenmiller has found today’s environment to be one of the most difficult to understand.
“I have been doing this for 45 years, and between pandemics, wars, and crazy policy responses in the US and around the world, this is the most difficult environment I have ever encountered, and the six We are confident in our projections ~ 12 months ahead.”
In most cases, it is best to refrain from action and hold a large risk-off position, ready to deploy after the market stabilizes or calms down.
New lows are likely and we still hold the same view that we have yet to reach final conclusions on the cycle of stocks, risk assets and Bitcoin.
I would like to remind the reader of the magnitude of the bear market rally we have seen so far and the magnitude of these rally in 2000 and 2008 analogues. There are other cycles to study and compare, but these are just a few recent examples.
SPX rose 17.41% from its lows and Bitcoin climbed to $25,000. Still, we think it’s not going to lower the next bounce and the medium-term downtrend is still on. The final stage crashes of 2002 and 2009 also saw the S&P 500 fall after his over 20% gains. Remember, there is no free lunch as the market is piling up on doomsday news about overshorting bloody situations and higher leverage.
S&P 500 rises from 2022 lows
S&P 500 rises from 2007-2009 lows
S&P 500 rises from 2000-2002 lows
Another interesting thing to note is that bear markets are usually short, lasting 10 months on average. That 10-month benchmark puts us roughly where we are today. However, there is a useful idea and argument that the current collapse we have seen so far is about the readjustment of interest rates, bonds and credit to a unique historical period. we barely Bear market for classical and cyclical returns.
Bitcoin’s recent past volatility and implied volatility have been eerily subdued compared to historical standards as bonds, currencies, and global stocks all continue to trade with increasing levels of volatility. increase.
Bitcoin’s recent lack of volatility may indicate that much of the bull market’s leverage and speculative mania has been almost completely washed away, but there are no indications of vulnerability and volatility, or a huge legacy. We are looking at the market. Short/medium term headwinds.
While the world around Bitcoin price action looks increasingly uncertain, the Bitcoin network is completely unaffected at the protocol level, providing a neutral financial environment despite exchange rate volatility. It continues to serve as an asset/settlement layer.
Tick tock, next block.
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