Too Many Variables

I did a podcast with the Epicenter guys this past weekend regarding the coronavirus that they aptly called “Too Many Variables.”

That’s how I continue to feel about the coronavirus and its impact on both the financial and crypto markets. It's disorienting, but we know it's really bad.

It seems we’re swinging back and forth between really bad options that would either lead to global economic chaos or global health chaos. The middle ground bull case seems to yield a severe, but manageable recession with a mere million American deaths -- if we are indeed past the point of no return on containment (and we don’t get a springtime respite from the spread).

Fortunately, it seems as though the U.S. and Europe will pull out all the stops in order to avoid that point of no return. Efforts to get citizens to shelter in place and abide by other extreme containment policies give me the same feeling today that I got several weeks ago after seeing how the Chinese were approaching the crisis in Wuhan. That is, the concern over the virus must be more than mere hysteria if world leaders are universally willing to torpedo their economies, risk financial contagion, and spark social unrest to limit its impact.

I mean, we’ve got people seriously talking about $3 trillion stimulus programs as a superior option to letting “the flu” simply run its course. Amazing. And terrifying.

The New York Times has a nifty little tool that lets you play with two variables - infection rate and fatality rate - to better understand the health threat domestically. The Imperial College of London ran three simulations that spit out death estimates in the 500k to 2 million range depending on our containment efforts. But even that short sells the potential toll if we can’t “flatten the curve."

Clearly, world leaders weren't willing to live with such a high death toll, and are now backed into a corner. With limited good options I continue to think the markets - crypto and otherwise - will get worse before they get better. When they get better, though, it will likely be disproportionately good for BTC as a new global inflation hedge.

-TBI

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