(Will BTC experience a deep bear market at this stage)
A bear market will inevitably lead to an economic recession, and neither the Federal Reserve nor the government can afford such consequences, especially before the midterm elections, as the economic and political costs of a significant correction are so high that the recent risk-return profile of the US stock market remains favorable.
Will the US stock market and BTC experience a deep bear market at this stage? If it happens, will the US government bail out?
Regarding the first point, there are two necessary conditions for a deep bear market to occur in the foreseeable future:
1. Either the economic system encounters problems, such as a collapse in the bond market leading to consecutive defaults, or there are major issues with inflation. Next year, not only will it not cool down, but it may accelerate, preventing the Federal Reserve from cutting interest rates and requiring rate hikes to curb it. So, can these two points occur? Frankly, debt defaults are possible, but I do not believe they will transmit to the entire system, as the fundamentals and cash flow of companies, aside from a few, remain healthy. Regarding inflation, positively speaking, tariffs have been implemented for nearly a year, and the transmission of prices is basically complete, with no additional momentum for inflation to continue rising. Negatively speaking, rate cuts, liquidity releases, a dovish Federal Reserve chairman, and resilient consumption could keep inflation sticky, making it difficult to reduce significantly. Therefore, the current general view is that while a slight decline in the market is not ruled out, I believe the probability of a deep bear market similar to the internet bubble is not high.
Now let's look at the second question: If a deep bear market occurs, will the U.S. government bail out?
Let’s take a step back and assume that the risk we think may occur does happen. Will the government come to the rescue right away? Personally, I believe that at this stage, the government will bail out, mainly covering risks of debt defaults and the collapse of confidence in AI, especially regarding assets related to AI data centers. When a large-scale cash flow break occurs, it is very likely that the government will step in to save the situation, such as by providing low-interest loans or directly investing to boost confidence and stabilize the market, in order to avoid the economy suddenly falling into distress. Additionally, in the current context of U.S.-China AI competition, the U.S. cannot afford significant problems in the financial market because the current U.S. AI heavily relies on continuous support from the financial market. Only with ample funding can technology continue to advance. If one day the enthusiasm of the capital market for AI suddenly wanes, it will inevitably slow down the pace of AI advancement, just like during the internet bubble burst years when innovation and progress noticeably slowed for a few years.
Therefore, looking at the above, Ah Xin believes that the U.S. government will choose to bail out during a crisis. Of course, this tactic will only be used at critical moments; not every bad situation will be bailed out. #BTC #U.S. stocks
