Quantitative Tightening Drains Crypto Resources

For many crypto enthusiasts, Bitcoin is viewed as SOUND MONEY due to its capped supply. (There will only ever be 21 million bitcoins, with around 19 million currently in circulation.)

Post-Merge, Ethereum has been dubbed ULTRA-SOUND MONEY for its deflationary model. (There is no new Ether issued to miners, and each transaction permanently removes a small quantity of Ether.)

However, when evaluating their actual performance, neither holds up:

Bitcoin and Ethereum have surged 340% over the last five years, yet they have both plummeted by 55% in the past year. The term "sound money" serves more as a marketing phrase than a factual description, much like the term "all-natural" on food packaging—it lacks substance. While the foundational principles of both Bitcoin and Ethereum are solid, their volatility makes the Bolivar of Venezuela appear stable.

Volatility can benefit investors—especially during significant upswings—but it poses challenges for everyday users who wish to utilize crypto as a stable currency.

Here's a visual representation of where BTC and Ether fall short:

It seems we meet again: The Federal Reserve and its questionable monetary policies.

Currently, the Fed is engaged in quantitative tightening (QT)—raising interest rates and tightening monetary policy—which negatively impacts asset values.

Bitcoin and Ethereum act as hedges against loose monetary policies, thriving when the Fed is engaged in money printing and quantitative easing (QE). Now that the Fed is tightening, Bitcoin and Ethereum are facing severe downturns.

This scenario aligns with the Dollar Milkshake Theory.

As the U.S. dollar strengthens, it absorbs liquidity like a straw, draining resources from crypto.

Unfortunately, a larger issue looms.

The Fed's Impending Cryptocurrency Decision

You, I, and the average person on the street lack influence over the Fed's actions. This unelected, unaccountable institution wields more power over our lives than any other organization globally.

The Fed is poised to select a cryptocurrency.

Why?

They cannot continue hiking interest rates—QT—without jeopardizing the global economy. A recent article in the WSJ reveals the UN's plea for the Fed to cease rate hikes and resume money printing, as the dollar is debilitating economies worldwide.

It's a dire situation.

The Fed faces a choice: either continue raising interest rates, leading to widespread economic collapse—including your 401k, housing market, stock market, bond market, and global economies—or cease rate increases, resulting in soaring inflation.

“In moments like this, I wish I were the Fed Chairman, declaring, ‘This is the most chaotic situation I’ve ever encountered; I need to exit now!’”

Instead, the Fed is likely to pursue a third option: The Great Reset, which entails introducing a new global currency.

I suggest looking into FedNow immediately.

This new real-time payment system is under development by the Fed.

Although they have been working on it for years, the timeline is accelerating, positioning it as a direct competitor to Bitcoin and Ethereum—or potentially adopting an existing cryptocurrency like XRP or XLM.

The Positive Side: FedNow Versus Ethereum

To keep this section concise, there is some good news.

The current economic turmoil is precisely why Bitcoin and Ethereum were created.

They serve as safe havens when traditional markets falter due to currency depreciation. True ownership is an illusion—especially if FedNow expands and transactions are surveilled akin to a Patriot Act 2.0. Recent events underscore this lack of ownership:

• During last year's trucker protests in Canada, many faced frozen bank accounts, with some accounts emptied.
• Russians with no involvement in the conflict lost their savings at the Central Bank level.
• The Cyprus banking crisis of 2012 exemplifies similar issues.

If Bitcoin and Ethereum uphold their decentralization promise—which Ethereum has struggled with recently—they could become invaluable assets for the long term, regardless of purchase price.

This encapsulates my response to the writer mentioned earlier. It’s preferable for your Bitcoin to lose 40% of its value while retaining ownership than to rely on cash, real estate, or a 401(k) subject to seizing or constant devaluation by central banks.

Ultimately, everyone will likely possess some Ethereum and Bitcoin.

Inflation is a persistent issue:

Although not every average person possesses Bitcoin or Ethereum, everyone has access to it. That’s crucial. My interest in Bitcoin and Ethereum is not merely ideological; they are the most viable solutions in a broken financial system.

This is why I’m eager to share this information.

The Bullish Argument for Ethereum

You cannot own the bank you use.

You cannot own the exchange you rely on.

However, with Ethereum, you can own these elements, which underscores its power.

What Ethereum needs is more practical applications. I want to see individuals utilizing it for more than mere speculation or purchasing inflated tokens.

Fortunately, projects like Uniswap (a decentralized exchange), The Graph (a decentralized search engine), and NFTs (monetizing culture) are starting to demonstrate tangible use cases.

As usage increases, so does value.

Here are additional reasons for my optimism about Ethereum:

• Environment: Ethereum's transition to a low-energy system minimizes environmental concerns.
• DeFi: More than 90% of all DeFi (decentralized finance) developers are on Ethereum, making it unmatched in this space.
• Perpetual Yield: Ethereum offers a yield of 5%; it functions like a perpetual bond, paying interest in ETH without a maturity date.

Final Reflection

Who is currently selling crypto?

Consider this question:

Is it long-term holders?

Developers?

Users engaged in real-world applications?

No.

The selling pressure on crypto has diminished significantly.

I believe we have reached the bottom of crypto prices. This doesn’t imply an immediate recovery. Recent price increases resemble a DEAD CAT BOUNCE. A meaningful upward trend won’t occur until the Fed resumes liquidity injections.

Yet, they will have to initiate this at some point, which is why I will always retain Ethereum and Bitcoin.

They act as a safeguard against a flawed financial system.

Consequently, I remain confident that Ethereum is poised to be the next significant development. While true sound money may not be here yet, it is on the horizon—and Ethereum is leading the way. The journey continues, and I have no plans to exit.

I hold immense respect for the writers who inspired this article; my intent is purely constructive. Best wishes, as always.

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Since childhood, I aspired to be a financial advisor, but that dream remains unfulfilled. I am not a financial advisor, and you should conduct your own research rather than relying solely on opinions from the internet. Nothing in this publication should be interpreted as investment advice.