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United States of America – Crypto has crashed. Recession fears have been streaked across all our information channels the past month. Leading economists and analysts have been working overtime to understand and read the situations evolving while still trying to forecast and mitigate risk financially, socially and politically making yet another memorable chapter in what has been a long streak of almost a roller coaster ride the American business industry has yet to witness in the past.
While most analysts are suggesting a recession this year or possibly next – it is not a definite – and balancing this economy let alone steering it is a major and complex process. I am not sure there is one analyst or economist that would want to be in either Mr. Jerome H. Powell or Ms. Janet Yellen‘s shoes right now. It is an extremely difficult objective to balance this market with so many new variables, mid-term elections and geo-political obstruction at every corner.
Are We Having Our First Real Time Recession?
When speaking variables, new variables at that, we have to look at a whole new group. For example the crypto market just lost $2 Trillion Dollars during the crash. Technically, that is a recession. Imagine if gold, the US dollar, real estate, escrow and or physical assets were in fact directly layered or correlated with these currencies? Although a major disaster for the industry and it’s investors we could have seen an even larger disaster.
So Where Is The Problem?
That is the tricky part to spot. We looked for what data we could find on crypto holder population and value by geolocation. Most data is old, not credible, not accurate, not updated or early pandemic. We took what we could find and then compared it with the data of exodus from people and companies after the last election and mining banning migrations.
Most recent analysis says most risk exposure to these markets would lay in a selective concentrated area with Texas and Florida holding a majority of crypto currency companies, technologists and employees. New York and California still have some risk as well but not of that of Texas and Florida.
The two markets are also highly leveraged in the form of highly over valued recent purchases and conveyance transactions within real estate and company mergers and acquisitions. These factors will reveal or will have tell tales. Being in fact the first real time recession collateral damage will surface if it does over the next few weeks and months. These Aggregated losses weighed against collateralized assets and it’s own inflation could accumulate – and if so – will break over the next few weeks and months.
Can We Blame The Fed? Not Really.
Currently cryptocurrencies in their current form are engineered around the point of total decentralization and by design a separatist currency betting on the USD or Gold to fail. With crypto currency’s bad reputation and characteristics aside investors and corporations need to treat the asset class as extremely volatile and due diligence should be done extremely carefully as we are witnessing what it is a identity crisis within the industry.
Be wary of influential people manipulating such markets and or marketing it. Complexities within the cryptocurrency industry have also gotten harder to navigate with new guidance, law, and enforcement coming down the pipeline.
Cryptographic Currency Is Not Block Chain
Corporations, businesses, investors and the public should research the differences in cryptographic currencies verses blockchain technologies and cryptographic networks with due diligence when investing and handling other responsible roles such as pension funds, retirement fund, etf’s and so on.
Other very important variables to weigh should be the environmental impact amongst other collateral damage. The crypto currencies in the crash are energy dependent. To invest responsibly or to run successfully there is substantial issues within the cryptocurrency industry and mining. You can directly correlate crypto currencies as dependent on the energy market, increased consumption and additive to accumulated inflation.
When decision making, venture capital and or investment practice these points and factors should be considered as well as what consequential dependencies it could aggregate or aggravate to limit inflation and energy consumption.
What To Watch
Whether we see a broader stroke of recession over the next year will be mostly unknown as the FED tries to steer away and straighten from what could have been a catastrophic series of events over the winter and spring. Property Values, Wages and Production are all key components and indicators of a potential further recession – job loss and lowering of those values will cause the scales to tip more toward a recession.
After record profits compounded by inflation corporations are cash rich. While we are witnessing a broad range of larger corporations in fact re-investing and spreading inclusiveness we are also seeing a overwhelming group being more obstructive. As much of it is political we still must weigh it in all strategies and risks.
The only incentive for most corporations to invest is through new competition from new players and we are accustomed to and have all seen before the stone walling from major corporations and big tech that can further aggravate or further a recession. This year is no different.
Political Mid-Terms & Continued Geopolitical Interference
The Russian influence, attacks, and war in Ukraine are considerable and a correlated risk variable to consider when making business decisions, purchases and planning. These risk waves are unpredictable but identifiable and have ripples that reach worldwide as planned. Having a better and wide ranging knowledge of geopolitical events will help mitigate and plan for disruptions and distractions.
Corporate Builders & Landlords Verses SMB Home Builders & Landlords
Risk and signs of recession could also be seen in over valuation inflation of home prices. Homes being brought up by a new influx of corporate buyers entering the real estate and housing markets. Although these players can help in some situations the majority track record has not been great. Forecasts don’t look much better.
In addition pushing out SMB and local landlords can have increased pressure on a recession. Most homes built are built by small and medium sized home builders. As well as most income and jobs. Most homes are owned by citizens and we do not want their equity receding or being attached to a flash recession.
Interest rates issued currently are the highest since 1994 and directly will hurt the smaller businesses and home builders directly much like the real time recession we just witnessed in crypto where the biggest losses will hit the retail investors or American companies.
We are seeing some normalization and decline in inflation within the construction industry and housing construction costs. Lumber is in the $500+ range, builders are negotiating again and property values are at what appears to be a possible stall and decrease. This is a good sign.
Although we have seen a small recession limited to a small segment in comparison to the Real Estate industry. Equity will be a key number everyone will watch but should not be a fail safe for the citizens, FED and investors. Too much action or other factors at bay could cause real estate values and working wages to decrease too much and or possibly job losses.
3D Rendering Credit @argus
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