We've already seen the world's governments and central banks react to covid once. Since then, the world has gradually returned to normal (most places) and we've seen most central banks present a likely path for the interest rates to return to where they were prior to the pandemic. Similarly, governments have presented their plans for a steady reopening of their societies (here in Norway, we've had 0 restrictions of any kind since (September 25.)
Now, however, with new fears surrounding omicron and impactful restrictions/lockdowns being proposed yet again, will those plans be forced to change? And how will that impact the stock markets and our favourite cryptos?
Let's have a look!
How will it affect short-mid term interest rates?
Many of the Western central Banks have over the past few months presented plans to raise the interest rates from their record lows following a return to normal for the economy. Here in Norway, the interest rate went down to 0% (all the way down from 1.5%) for the first time ever in spring last year following the first rounds of restrictions to handle the first wave of covid. Since then, employment is back to where it was before the pandemic hit and economic growth is as high as ever with net export setting record levels.
As a result, the messaging has been strong, that following a first raise of 0.25% that we had in September, the bank would raise it again in December and then an additional 4 times throughout 2022. Thus bringing it back to 1.5%. My question now is whether or not they are likely to stick to the plan if travel restrictions, supply chain issues, restrictions on social events etc, are returning with the new covid variant and increased number of covid cases.
Aside from considering its goal for inflation, the central banks primarily look at household financials and economic stability. With soaring electricity prices across Europe, and an increased uncertainty for businesses, it makes a good case for the central bank to be more reluctant to raise the interest rates back up as quickly as intended. Thus, the recent events have made it more likely that interest rates will stay low for longer than previously thought.
So what about governments?
Is there any more fuel left in the stimulus tank?
Most countries have already seen their governments go through a spending spree of stimulus packages in order to do damage control for their own response policies and restrictions made to covid. An obvious question then should be whether or not they've reached their limit, or if there are still cards left to be played?
I deem it unlikely that governments will want to spend nearly as much money on stimulus and relief packages this time around. One reason is the aftermath results we now have from 2020, where most companies receiving stimulus "in order to not risk going out of business and needing to let go of employees", instead had record results and provided record high dividends to their private shareholders. I find it unlikely, that governments will want to hand out nearly as much when companies have both demonstrated not needing it in the first place, while now also being much better prepared to handle remote work and the new reality presented by covid. A second reason is simply that most have already passed the bills they were looking for anyways, and will face an increased battle to get done more.
In short, I think the most likely outcome is that interest rates will stay low longer, stimulus bills will be far fewer, but some new restrictions and/or lockdowns are likely to return short-term.
What will it mean for Bitcoin and Crypto?
As much as I'm sure we all now hate the responses from central authorities to covid, ironically it is likely to benefit Bitcoin and crypto. Facing more market uncertainty and restrictions, central banks are likely going to be slower at raising the interest rates back up again. Alongside "green companies" (who tend to have a debt position to finance growth), crypto-projects are likely to benefit from this as people look for anti-inflation stores of value. Similarly, more stimulus policies are also likely to add more fuel to the Bitcoin bull-fire.
It remains to be seen how the stock markets deals with omicron. One possibility is that more restrictions and supply chain issues, combined with less governmental stimulus as there's not as those limits have already been reached, can cause for a brutal correction this time around. In such an event, I expect a lot of money to flow out of Bitcoin (despite it arguably being a good store of value in such an event) in order to diversify more into other declining parts of a standard portfolio. Another perhaps more likely scenario is that the markets stay more flat as companies have had the ability to adapt to a life with covid, and can do somewhat fine despite it.
In any case, I think the case for Bitcoin and decentralized alternatives will continue to grow stronger as the centralized bodies continue to fail and as people look for alternatives.
Or what do you think?
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I will like to think govts will print even more money for stilmulus packages and inflation will be higher while interest rates will go lower. All roads lead to crypto inevitably
It seems that way
It is too early to say what Omicron's consequences will be. But governments are acting fast this time because we all have learned the lesson. Better prevent now than lament later. I think the market action today indicates there was an overreaction on friday. We need to have more data. If Omicron situation keeps getting worse, even with countries acting fast in prevention, then I think central banks will probably make it a perfect excuse to delay the stimulus tightening and interest rise. In any case it is all good for crypto I think... It feels like central banks are losing control and more and more people are seeing it each day.
Well said. My guess is that Omicron, similar to Delta, will be more contageous, but less deadly. So there will be high infection numbers, but people (especially those with vaccines) will not see too severe symptoms. In that case, I still expect a lot of hysteri about high infection numbers (even if that doesn't necessarily matter much).
But let's see, and show precaution until we know more.
I agree. The infections numbers could be high, but hopefully without so many deaths. If we cannot vaccinate the entire world, new variants will keep evolving, Covid will be endemic and we will have to use different vaccines each year, like with the flu.
But after yesterday's words by Powell, it seems they are really starting to worry more about inflation... And they want to talk about accelerating the tapering. It is going to be two interesting weeks now. To wait for the tapering decision and to wait for more Omicron data. We'll see. They don't seem too worried about the Omicron variant and they focused on the inflation. Inflation is getting scary... Not as transitory as they said months ago... We all knew that...
"I think the case for Bitcoin and decentralized alternatives will continue to grow stronger as the centralized bodies continue to fail and as people look for alternatives".
It's as if they are all trying to pump Bitcoin without buying Bitcoin.
This is just the beggining... Fasten your belts and hodl
It most likely is. As much as I want to see the world back to what it was, it's also the perfect shit-storm to drive crypto-adoption.
Returned to normal?! Where did normal return to? E are in a new era. The next hundred years are being built now.
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Here in Norway we have had no restrictions or mandates whatsoever since September 25. when everything reopened. Fotball stadiums have been packed, conserts have had tens of thousands of participants, and clubs / night-life have again been going on full stop.
So I would say it has returned to normal here. However, new variant + rising number of cases now has returned the conversation about reintroducing restrictions. And we just passed one now to enforce quarantine when arriving from South African countries.
Here in America it differs state to state. They have vaccination commercials on the radio and tv. The media in constantly flooded with pandemic related propaganda. We now are required in certain cities to show vaccination cards in order to do any of the “normal” activities. The globalization movement is in full force with a truly global play. WWII worked ok as it included much of the modern world but this play is truly global. There are new target consumers such as Africa and we are investing in it with more investors now than ever. Many many encounters are done through video calls like doctors and such. Commercials for things like teen depression being bad now more than ever, and many other social engineering propaganda. Though it was well known that America would be the most difficult place to subdue.
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keep the war machine ready....that's all they got
💂♀️
I don't think that lockdowns will effect cryptos.
But for the stock market, yes it may effect it, as we already are seeing a dip in the petrol prices.
Do you think interest rates and/or governments stimulous bills can affect it?
🙄
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Hi,
This is not an important comment.
I just wanted to let you know, that the topic would be very different if it was "Ass Covid strikes back".
Best regards,
@apsu
"...ironically it is likely to benefit Bitcoin and crypto." I totally agree. I'm just waiting for another Biden bucks pump XD
In the USA, the fascists in Washington will do anything to keep Americans from winning against the Chinese communist puppet Biden. They will completely destroy America in order to keep their illegitimate power. This will lead to civil war (hopefully financial rather than shooting) and true Americans will prevail because, in the end, the totalitarians have no moral backbone and will destroy themselves.
Although, as you say, most governments have already experienced the majority of restrictions due to Covid19, I doubt that we are prepared to face this new Omicron knowledge. I sincerely believe that this will further strengthen the cryptocurrency market, so let's prepare for the final take-off of both #BTC and other #Altcoins, especially #Hive.