r/cryptocurrency Apr 1, 04:12 AM
Recession coincided with every major oil crisis in the past 50 years. As I wrote back in September, before BTC dropped over 50%: downside risk is severe and crypto markets are sleeping on it.
The conflict in Iran is rapidly spiraling into the worst energy crisis the world has ever seen - and it may now be too late to avoid. Until a month ago, the Strait of Hormuz supplied 20% of the world’s oil along with 20% of liquid natural gas. That supply is now gone, and the physical vacuum must be accounted for - in the next few weeks, the world has to figure out someway to consume 15-20% less oil and gas.
The full impact of the shortage is still 2 weeks away as emergency oil stockpiles are emptied and the last remaining tankers offload their final shipments. There won’t be enough oil for everyone - economic activity will have to slow to pandemic levels to account for the deficit.
The historical precedent is pretty clear: economic recession has coincided with each and every major energy crisis over the last 50 years: 1973, 1979, 1990, 2008. And while it’s still debated whether 2022 was a true recession, the Russia/Ukraine energy crisis coincided with a 19.4% crash in the S&P and 64% crash in BTC.
Bitcoin is especially vulnerable to the closure of Hormuz: ~38% of mining is natural gas, which has also been impacted by the closure of the Strait. Miners that rely on fossil energy will shutdown. The rest of cryptocurrencies will be dragged down with Bitcoin and the broader economy.
And it’s now only a matter of time.
POTUS said today he plans to withdraw from Iran in 2-3 weeks, whether or not the Strait is re-opened. That would guarantee we cross the mid-April cliff when shortages first hit American shores. From there, things only get worse each day that the Strait remains incapacitated.
And Iran has every incentive to keep the Strait throttled. Their negotiating leverage goes up each day that the energy crisis goes on. Their demands (formally recognized control of the Strait, reparations, protection for their nuclear program) are currently considered untenable, but that may change if the world gets desperate enough.
The broader market is focused on what the super powers like U.S. and China want. But the only one with decision making power here is Iran - and they know they have to inflict maximum economic pain to deter future aggression from the West.
submitted by /u/admin_default
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