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While the cryptocurrency market has been shaken by a sharp correction in recent days, the fact that US stock markets are hitting record highs is confusing investors.
Renowned macro analyst and FFTT founder Luke Gromen unveiled the reasons behind this contradiction in a recent broadcast. According to Gromen, Bitcoin is the “last working smoke detector” of the global liquidity system and is currently sounding the alarm.
Luke Gromen, noting that the rise in stock markets is not as healthy as it seems, argued that the record highs of major indices like the S&P 500 are entirely due to the seven largest AI-focused technology stocks.
Gromen stated that the market depth was extremely weak, and said the following:
“The AI sector is sucking up all the oxygen and liquidity in the market. Unfortunately, Bitcoin has also become a victim of this. Bitcoin is the most important smoke detector for measuring liquidity, and right now it’s not telling us good things. If left to free market conditions, the AI bubble would burst under its own weight. However, governments will not back down because they see this as a global power struggle and a new front.”
The analyst noted that the tensions with Iran and the prolonged closure of the Strait of Hormuz have not been fully priced into the markets, arguing that there is a great deal of complacency. Recalling the warnings from giants like Exxon and Chevron that their inventories are approaching critical levels, Gromen explained the situation with a striking analogy:
“This situation is like a man jumping from a 100-story building and saying ‘Flying is amazing!’ as he passes the 40th floor. What kills you isn’t the fall, but that sudden stop when you hit the ground. When inventories are depleted and demand is restricted (rationalized) through pricing, the Western world will enter a stagflationary recession. No Western country burdened with debt can bear this cost.”
Luke Gromen, stating that he approaches investors not as a doomsayer but simply as a “realist,” reminded them that 57 out of 58 countries throughout history that reached a debt-to-GDP ratio of 130% went through devaluation due to high inflation, and that the US also crossed this threshold in 2020.
Gromen’s main long-term scenario for the markets is as follows:
- Gold and Bitcoin will reach much higher levels in the long term.
- The bond market will continue to erode against physical assets.
Gromen stated that he is cautious about Bitcoin in the short term and that he himself has not yet made any major purchases after selling near the peak levels, adding that he is closely monitoring a possible bottom in the $40,000-$50,000 range indicated by technical analysts.
*This is not investment advice.