The rise of inflation, a sharp drop in the stock market, combined with growing energy prices and job cuts, are contributing to the fact that more and more analysts are beginning to talk about a recession, and the economic downturn is becoming more and more obvious.
The economic situation in the world
In anticipation of another increase in the interest rate by 50-75 basis points and a reduction in credit programs, the introduction of various restrictive measures contributes to increased volatility in stock markets and increased uncertainty on the part of investors, many of whom sell off their assets by closing portfolios.
The refusal to pay dividends further contributes to the fall of shares and their subsequent sale.
Due to large-scale financial restrictions and falling refinancing activity in the private sector, there is a reduction in lending volumes at an even faster pace than during the Great Financial Crisis of 2007-08. As a result, the probability of a recession in 2022-23 is increasing every day.
Now the Fed seeks to reduce demand so that prices decrease and stabilize. The main task of such a policy is to stop the growth of inflation and to achieve it, the Fed will continue to tighten its credit policy.
Despite the decline in oil and gas prices due to the ongoing recession and a sharp decline in demand for energy resources as of May 2022, the cost of gasoline as a percentage of consumers' disposable income increased to 2.5%, which is the highest in 8 years.
Oil and gasoline prices
The increase in gasoline prices increases production costs and contributes to an increase in the price of goods in all industries.
The current situation in the energy sector this year has been aggravated by the Russian–Ukrainian conflict, which has become a catalyst for rising fuel prices.
When the United States and its allies announced plans to impose an embargo on energy exports from Russia, the prices of crude oil, raw materials for refineries, rose sharply.
After the economic recovery from the effects of Covid, consumer demand for fuel after quarantine increased sharply. While the recovery from the pandemic has led to an increase in demand, the conflict between Russia and Ukraine has led to a reduction in supply.
And although oil prices are gradually decreasing, the price of gasoline remains at a high level. President Joe Biden has called for the suspension of the gasoline tax at the end of June as a solution to rising prices.
Using a car for American families is becoming more and more expensive. According to the Bureau of Economic Analysis, the total cost of all payments for the purchased car and fuel for it has increased to 6.5% of disposable income. It is the highest figure in the last decade.
At the same time, the S&P 500 index showed the worst first half of 2022 since 1962, and many investors fear that it has not yet reached the bottom.
The state of the cryptocurrency industry
The situation in the crypto industry is also complicated.
The cancellation of the UST binding and a lot of crypto lenders and funds that declared bankruptcy along with the liquidity crisis worsened the position of BTC compared to stocks, provoking a sharp drop in the entire cryptocurrency market.
And although the cryptocurrency market has shown recovery this week, it is a little premature to talk about reaching the bottom.
The lack of retail positions in the futures and options markets further exacerbates the liquidity crisis and makes it difficult for large players to place significant positions in the current market conditions.
The most important indicators of market dynamics are a sharp reduction in the number of active market participants in the form of retail investors and traders, and a significant drawdown for many large companies.
The share of unprofitable bitcoin supply reached 48.1% of all coins stored outside exchanges. Of this unprofitable BTC, almost 60% belong to long-term holders (28.6% of the total).
Unlike other markets, the crypto market consists of assets that are stored in a public registry.
This allows you to track the action of whales in real time.
Thus, the total outflow of funds from all exchanges in June reached a maximum of 151K BTC /month, the main recipients of which were whale wallets.
Despite the weak price movement over the past month and a half, this is the most aggressive indicator of bitcoin outflow in the entire history of the asset.
Due to the instability of the situation and the liquidity crises that the major giants Celsius, BlockFi and Voyager Digital have faced in recent weeks, small cryptocurrency exchanges are also very vulnerable, which turned out to be insolvent, but so far they are trying to hush up this fact.
And this also suggests that the bottom of the cryptocurrency market may not be reached yet.