Weekends are typically when the crypto markets start plotting their next move - if you look closely while the stock markets are sleeping, you can sometimes get a glimpse of what the true believers are thinking.
After the big dip this week, a few people did get back in. Not enough to cover the losses, but at least some of the bleeding has been stopped. But the dip was in response to the Fed projecting to raising interest rates in July to curb inflation - which has affected all markets (stocks, funds, gold/silver, even oil) - not just crypto.
If crypto was supposed to be a "hedge" against fiat, why does it seem to just run parallel to traditional assets pretty much every time? Because there's been significant collusion between them in recent years - much more than we were lead to believe, and much more that people would ever admit to.
People who know me know that I pay very close attention to real-estate markets and its connections to the crypto markets as a whole. I don't talk about it often because it's a niche topic with very little engagement, and somewhat of a touchy subject for some people - it brings about a lot of realities and scenarios that most homeowners aren't comfortable talking about.
Like the fact that many of them were leveraging their homes as collateral in order to get into the new casino in town - crypto/NFTs, then more recently, AI. I mean, when interest rates are at pretty much 0, borrowing a lot of cash to invest in something going up and up 100%, 200%, 300% seems like a no-brainer, no? It's practically "free" money.
Non-homeowners (which is the majority of people now in the US) might have trouble wrapping their heads around why anyone would do this since it seems risky and irresponsible - and they would be correct - it is generally considered a bad idea to take out a loan on your house in order to get into risky assets. But you have to remember that this is America - people don't like being told what they can or cannot do, even if it means hurting themselves in the long run.
Many homeowners are what we call "housing rich, cash poor" - where they might own a multi-million dollar asset on paper, but are barely making ends meet after mortgage, maintenance, and taxes. Many of them have the appearance of wealth but are pretty much living paycheck to paycheck, just like everyone else.
So in that scenario, you might start to see that the idea of taking out a loan at 1% interest to buy something that's growing exponentially would create some FOMO for someone who's short on cash but wants to "get in" - and you know, home values always go up and never down, so there's even less risk than you might think!
All of this is still irresponsible and a bad idea for the most part, but you might start to see how easily many could have fallen into that trap, since the temptation was strong and getting such a loan was only a few clicks away. But the reality is that a lot of the "growth" from the 21' hype cycle was fueled by debt, as well as the "emergency injections" from COVID where massive amounts of liquidity was poured into the system as a whole.
Funny money, in other words. When money falls out of the sky, people seldom question its source - but the price actions of the last few years were largely artificially done, because it was based on speculation and liquidity injections rather than based on anything tangible like usage or revenue. When the shiny thing on the block was no longer interesting, people moved onto AI, letting the markets as a whole, crash.
Most people who got in at 21' never really cared about the blockchain or the technology behind it - they were just doing an arbitrage play between low interest rates and "some tech thing" that happened to have numbers going big. That's why we see all these useless and half-assed crypto products now, that seem to get hacked on a regular basis and has yet to turn a profit, anywhere.
When crypto projects stopped producing its ponzi-like effects, people moved onto AI stocks and convinced themselves they could do the same - even though objectively speaking, most of them probably lost a lot of money, and then some. If they're employed, they're paying off their losses with their jobs, but it just adds to the "squeeze" that everyone has been feeling lately.
There's been a report that just came out that more than half of households failed to meet their monthly payments in 2025, and it's likely even worse this year. There's a reason why there's a tone of desperation that comes with anyone talking about finances or economics these days - whether you're rich or poor - the rising mountains and layers of debt woven into every angle of society threatens to unravel everything at its core.
Credit card debt is the highest it's ever been in history, defaults and bankruptcies are on the rise, and foreclosures are about to start becoming a real problem as people are forced to sell to pay off their debts. It's like 2008 all over again, but several times bigger, since they didn't really solve the issue last time, either.
And it all starts with rising interest rates. Even the thought of it coming soon was enough to spook the entire markets this week - hence, the dip.
What Happens When Interest Rates Continues to Climb?
Now, if interest rates were to rise (even to modestly reasonable levels) that threatens to put the debt-fueled "market rally" to an end. The Fed is in a no-win scenario right now, where if they lower rates, inflation spirals out of control; if they raise it, they risk compounding recessionary pressures even more.
There's a reason why Trump himself is so adamant about lowering rates - because he himself is the biggest abuser of these loopholes as whole. Own a lot of land -> take on collateralized debt using said land -> use that money to turn a profit into risky assets (even better if you can manipulate the markets using political power) -> profit, then dump on the markets after you've extracted people for all its worth. He may not know how to build real products or anything for lasting value, but he does have the financial engineering parts down to a science, you have to admit.
The borrowing rates have been steadily climbing since the end of the pandemic era, sitting at 5-6% now. As the rates get higher, the cost of borrowing gets too high and there comes a point where this strategy no longer makes sense - for some people who don't know any other way how to make money, this poses a big problem, which is why they've been so adamant of keeping the status quo as it is, even as the dollar continues to spiral into hyperinflation. But at some point, it has to be done.
So the gist of it is that if interest rates rise, there will be less borrowing, less borrowing means less speculation, less speculation means less money in things like stocks and crypto overall. How much less? That's anyone's guess at this point, and we don't know who's going to sell things off when the going gets tough or who's going to double-down. Only time will tell.
Stop Gambling, Start Panicking
So what comes next? A lot of people who invested in crypto and alternative assets in the last few years are still holding onto the idea that crypto will one day prove itself to be a hedge against the fiat markets, but given that a lot (if not most) of the liquidity in the space is actually propped up by fiat contracts and agreements, there's sort of a cognitive dissonance and incongruity that has yet to be resolved.
In the earlier days of crypto, most of the coins moved independently, since they operated on their own terms, but ever since Bitcoin pairings became a thing, crypto assets started moving in parallel to each other, and ever since fiat onramps and exchanges became a thing, the stock markets and crypto itself started moving in parallel, too. In order for blockchain projects to reclaim its identity, a bit of "disentanglement" is in order.
In the near future, there will be a lot of liquidity floating around in the markets - mainly comprised of people who are forced to sell their homes in order to pay their bills. Post-sale, people will be given access to a lot of cash (though probably not as much as they would've liked), thinking about where to park their money - cash, stocks, gold/silver, crypto, foreign currencies - which seems the "safest"?
This is a very different kind of money that has fueled the markets up until now - which was largely fueled by leverage and debt up until now. Smarter projects ought to pivot their messaging in anticipation of this new scenario because the casino models are pretty much dead at this point - the industry has to adapt, or it will die a slow death clinging onto what no longer works.
In this scenario, Tezos may have a chance to finally make its mark, as long as it can prove itself to be reliable - especially in extraordinary times like these. Bitcoin has no staking so it's uncompetitive, Ethereum's fees are too high and L2s not secure enough for serious use, and Solana's ties with FTX is an automatic disqualification from anyone who's taking their finances seriously - so...not too many good options there.
But an ecosystem that's reliable in functionality, transparent in their governance, and stands out among the crowd in the artists that choose to XTZ as its home - well, there just may be a chance. This was always the only chance this was ever going to work, honestly.
Until then, 30 cents, 25 cents, 10 cents, etc. Those price points are largely irrelevant in the bigger picture. It's either going to work or not, and people are either going to come, or not. The hope is that during the period of "disentanglement" the project will reinvent itself into an identity that people can resonate and identify with - to gain the trust in the crypto industry that was once lost.
Can it be done? We'll see. It comes down to whether or not the community itself will rise to the occasion when the crap hits the fan and every decision really starts to matter. Time will tell if people are ready. 👀