Many are celebrating recent advances in the stock market and see this as evidence of a recovery. However, an analyst calls it a bluff and argues that this was exactly what happened in 1929.
If we use history as a guide, shocks and depression rarely occur all at once. Instead, it takes time; There is a lot of volatility as the market tends to bottom, which often leads to massive volatility. Lately the US financial markets You have seen a massive upward trend and continue to rise. Could we finally see the beginning of a recovery? Some don’t say so quickly.
Lessons from 1929
According to analyst and lawyer Jake Chervinsky (@jchervinsky), there is room for skepticism about this upswing.
As he says, the Dow almost fell over in 1929 50% between September and November this year from 386 to 195 points. He then recovered in one 40% in the following five weeks reached 268 points.
Many certainly believed that the crisis was over at the time, but they were wrong. Over the next few years, the Dow continued to find lows and would soon bottom out at 41 points: 85% less than the alleged “reversal” of 1929/1930.
I wonder if the market mood was like this in 1929.
The Dow fell by almost 50% from 386 to 195 from September to November. It then recovered by almost 40% to 268 in five weeks. Did everyone think the pain was over?
The low at 41 was another 85% lower and years away.
– Jake Chervinsky (@jchervinsky) April 7, 2020
As Bitwise’s Chief Operating Officer (COO) clarified, this is a classic pattern during the bear market recovery.
I agree. “Bear market rallies like this are classic in a depression, as workers, investors and policymakers tend to exaggerate the importance of relatively small things that appear up close” (Dalio) pic.twitter.com/mIKnY6qGCg
– Teddy Fusaro (@teddyfuse) April 7, 2020
What does that tell us about the recovery of the markets today? It seems to indicate that we are not out of danger yet and that it is too early to win.
The macroeconomic situation
If you want to get an idea of the financial markets, it is helpful to consider the macroeconomic situation. The situation has troubled commentators. Unemployment claims in the United States have soared to a record high, consumer confidence has fallen and we are now effectively in a “recession”.
Analysts have described the current crisis as a “deflationary shock”. Global demand has dried up and bankruptcies are expected if the current blocking situation continues. Prices are expected to fall, but if ordinary people have less purchasing power than usual, this will only affect the macro picture.
In the midst of this unique crisis, the cryptocurrency industry is in a difficult position. However, it should be noted thatIt has historically followed the S&P 500. So far, Bitcoin has entered the US financial markets this week. Therefore, cryptocurrency traders would be wise to follow macroeconomic trends to assess where the market is going. The future looks uncertain at the moment, but we can look forward to halving Bitcoin – at least there is hope in these exceptional circumstances.
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