Biggest Macro Risk for Bitcoin Presents for the First Time Since 2006
Three central banks are about to tighten at once for the first time since 2006. The last time that happened, the assets bought with borrowed money broke first.
The European Central Bank has already raised. The Federal Reserve decides Wednesday. The Bank of Japan decides Friday. The macro risk for Bitcoin (BTC) is what that combination did to risk assets last time.
The 2006 Template for Risk Assets
The ECB moved on September 10, taking its deposit rate to 2.50%. Futures now put the Fed near 90% odds of a hike.
"The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period," ECB Governing Council said.
In 2006 the squeeze landed on May 10. Over the next month, losses stacked in a very tight order.
- The S&P 500 fell 7.7%
- Europe's Euro Stoxx fell 13.3%
- Japan's TOPIX fell 16.5%
- Emerging markets fell more than 20%
That order was not luck. Cheap money had been borrowed and pushed into whatever paid most. When borrowing got expensive, the furthest-flung bets were sold first.
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