- Tuomas Malinen predicts a collapse of the Eurozone and a negative impact for Bitcoin in the short, but a positive effect in the long term.
- Bitcoin is decoupling from the S&P 500 against negative forecast by the U.S. Federal Reserve.
The Chief Executive of GnS Economics, Tuomas Malinen, has drawn a negative picture for the European Union. According to a thread published on the social network Twitter, Malinen predicts an impoverishment of European countries and an almost imminent collapse of the Eurozone. Malinen refers to the European Union as a “poorly conceived project from the outset”. Under these conditions two scenarios for Bitcoin arise.
According to his analysis, Malinen believes that a decision by the German Constitutional Court will be the catalyst for this scenario. In a decision, the Constitutional Court denied that the “helicopter money” policy followed by other financial institutions worldwide, such as the US Federal Reserve, would be applied. In addition, Malinen explains that the Constitutional Court’s decision orders the following:
Unless the ECB Governing Council adopts a new decision that demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the PSPP (public sector purchase programme) are not disproportionate to the economic and fiscal policy effects resulting from the programme.
Therefore, explains Malinen, the decision of the German Constitutional Court could force the Bank of Germany (Bundesbank) to adopt a monetary policy different from that of the European Central Bank (ECB). If this happens, Malinen continues, Germany would leave the Eurozone by default. The analyst explains that the political decisions of the various EU leaders will also have an effect on the collapse of the Union.
Malinen stated that by reducing the ECB’s resources, as the German Constitutional Court’s decision has done, countries like Italy could receive little financial support. Therefore, they could be forced to assume austerity measures, although they are already hit severely by the Covid-19 pandemic.
The result will be the emergence of nationalist or anti-EU parties or a strengthening of such parties in countries where they already exist, Malinen said:
The ECB will, most likely, not be able to act as “limitless back-stopper” for the EZ bond markets. National leaders of debtor countries are likely to be reluctant to accept austerity conditions (…). The support for the euro is waning among political leaders (…). And, things will get even more dire, also politically, when the European banking crisis gets going.
Decoupling of the S&P 500 and Bitcoin bull run
On the other hand, Bitcoin is currently decoupling from the traditional market. The S&P 500 has shown a negative performance in recent days. Although the Bitcoin also showed a high volatility before and after the halving, the cryptocurrency seems to be recovering. The decline in the traditional market may be motivated by statements from Fed President Jerome Powell, who said that the economy is in a moment of “high uncertainty”.
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In the past two months, Bitcoin has showed signs of decoupling from the S&P 500. This trend seems to strengthen right now, however it is necessary to wait if the decoupling will continue while the Bitcoin continues its bullish trend. At the time of publication, BTC is priced at $9,692 with gains of 8.80% in the last 24 hours.