Hindsight is 20/20, they say. And when you look back on the 2008 credit crisis post-Lehman, it’s easy to understand what happened: central banks, namely the Fed, refused to give in. They turned on the fire hose at such an insane level and for so long, that they literally forced investors out of bonds and into stocks, real estate, and other risky assets. Traders doubted, for a while, central bankers’ sincerity – but eventually, they were reminded of the oldest axiom of Wall Street: Don’t Fight the Fed.
There are no central banks for digital assets and this is something to keep in mind as the decline of Bitcoin and alt-coins hits month 15. You wanted decentralization – there, you can have it. No central banks; no soup for you.
This isn’t an indictment of cryptos or a prediction of what will transpire next. Nope. It’s just an observation that keeps popping up in my mind. By forcing negative yields in the bond market for a decade, Ben Bernanke and Janet Yellen made risk-taking irresistible. Today, there is no artificial floor for Bitcoin or similar assets, so it’s unclear how low we can go or how long we can stay there. I hear plenty of chatter of institutional players coming onto the scene but the evidence is spotty. DYOR.