Opinion: The current market is in a dangerous bubble zone, and cryptocurrency may become the new systemic risk trigger point
On February 18th, according to DL News, Wolfgang Münchau, co-founder and director of Eurointelligence and financial columnist, published a new analysis article stating that the current market is in a dangerous bubble zone. Cryptocurrencies could potentially trigger the next financial crisis.
The article points out three major risk factors: The valuation of the Meme coin market has reached $80 billion USD, with Dogecoin accounting for about half of the market value and TRUMP's market value reaching $3.8 billion USD. Although its scale is not yet threatening to the global financial system, it has already had negative impacts on markets such as Argentina. Stablecoin's market value has reached $225 billion USD and faces significant systemic risks. As stablecoin reserves are mainly allocated in US short-term government bonds, an increase in inflation prompting interest rate hikes by the Federal Reserve will lead to a sharp drop in reserve asset values. This asset-liability mismatch risk is similar to that of the Asian Financial Crisis in 1997. The cyclically adjusted price-to-earnings ratio (CAPE) of S&P 500 index is close to 40 which approaches historical highs during internet bubble periods; AI concept stocks represented by Nvidia may repeat history like tech stock bubbles at end of last century.
Münchau believes these seemingly independent bubbles might merge into a "super bubble". Factors such as Trump-related policies (like trade wars or excessive tax cuts), relaxed cryptocurrency regulations etc., could all be potential triggers leading to domino effects within global finance via rising inflation rates, bond-market crashes or stablecoin crises - mechanisms similar those seen during 2008’s financial crisis may reappear.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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