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The US is looking at the impending credit crunch ahead; Galaxy CEO thinks it’s the right time to buy gold, silver, and Bitcoin. Recent data places inflation at 6%, BTC just touched the $26K mark, and Q4 2022 revealed that the US credit card debt reached almost $1 trillion.
Novogratz thinks its time to buy Gold, Silver, and Bitcoin
Founder and CEO of Galaxy Digital, Michael Novogratz, explained in a CNBC interview that, as the United States and the world is supposed to be in a credit crunch, “You want to be long, long gold and silver […] and you want to be long Bitcoin.”
On March 15, 2023, Novogratz spoke on CNBC’s Squawk Box, where he said that customarily banks rebuild capital by lending less, meaning a credit crunch is on the horizon. Also, certain indicators like the commodities market are already pointing toward recession.
As three major banks, Silvergate Bank, Signature Bank, and the Silicon Valley Bank have to shut their doors; the US banking industry is going through a category 2 hurricane, slowly advancing its speeds. Creating negative sentiments towards a downgrading US banking system.
While speaking, Novogratz also suggested that lowering the interest rate policy should be on the cards of the Federal reserve. Sales could have disastrous effects while hiking the rates rapidly, just for credibility. While deeply concerned with the state of the US economy and its future, he seemed excited about the recent bullish outcome in the crypto market.
He added that the current situation is the best time to be in Bitcoin and crypto industry, as this was why they were created in the first place. Also cited is that governments tend to print more money during tough times, thereby decreasing fiat value and inadvertently increasing inflation.
The US Credit Crunch & Impending Global Recession
According to recent studies, the US government ran out of credit to spend. High inflation rates and increasing interest rates deepen the wounds of debt-ridden tech companies. As they hoped to ride the pandemic-era growth, other factors led to the US credit card debt reaching almost $1 trillion in the fourth quarter of 2022.
A credit crunch is an economic situation where financial institutions, due to multiple reasons, reduce their lending activities. They also apply stricter rules and requirements for obtaining a loan, which creates a lesser availability of loans. It generally happens during or around a recession when the capital is tough to secure.
Fearing defaulters, most banks deny loans to even deserving candidates. This limits their funds, which can either be invested back in the market or be used for their growth, which brings liquidity into the market in the long run. Benefiting the whole economy.
This credit crunch might be temporary, but if this decline in economic performance continues for two consecutive quarters, with decreased spending, it’s a recession.
However, a credit crunch might turn into a recession when businesses do not get extra funds for some planned investments; they would have to cut their expenses, which may include the employment budget. This leads to productivity decline and unemployment. If this scenario continues for a long time, general economic activities will slow down while the recession rises.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
