【Observation】Is the US stock market becoming an unbeatable fantasy casino? How will the crazy stock market surpassing the cryptocurrency world collapse?

In Taiwan, we were the first to report on Ethereum founder Vitalik's amazement at the U.S. stock market, and we have seen many cryptocurrency media outlets discussing this matter. Observing the market, since the massive deleveraging on March 12-13 this year in both the stock and cryptocurrency markets, Bitcoin and the S&P 500 index have been positively correlated, with a decrease in correlation only in May, but recently Bitcoin and the U.S. stocks are still showing a positive correlation. Moreover, the U.S. stock index often experiences greater gains than Bitcoin.

However, will the endless expansion of the U.S. stock market come to an end, or will it continue to sustain? Jim Bianco, the CEO of Bianco Research, stated in an interview with Yahoo Finance that in the short term, the U.S. stock market is a market where investors won't lose, but sooner or later, there will be a rapid downturn.

The Power of Printing Money and the Stock Market Becoming a Lossless Market

Jim Bianco told Yahoo Finance that the power of printing money was evident when the Federal Reserve (FED) intervened in the market rescue to cause a surge, especially when FED Chairman Powell stated during a hearing on the 18th that they were "buying corporate bonds just because they are worried about negative things happening."

Highlight: The Fed is “putting a floor in this market. This is a market that investors can’t lose,” @biancoresearch President & CEO Jim Bianco says. “Now, I don’t believe that’s going to last forever and I think we’ll run into trouble down the line, but not now.” Full comments: pic.twitter.com/GFYvOQwWjU

— Yahoo Finance (@YahooFinance) June 17, 2020

Bianco believes that this indicates that the FED has set a floor for the market, showing that it is a market where investors will not lose money. This is why high-frequency traders and Robinhood users are rushing into the market because they know it is a risk-free market.

Yahoo Finance then asked whether the FED would start buying equities as a more aggressive printing money measure. Bianco said it is not possible at the moment, but he believes that when the current printing money measures no longer work, we may get a different answer.

He recalled Powell's statement in May, "There's a lot more we can do, we have plenty of ammunition. Essentially, there are almost no limits." This indicates that the FED will continue to stimulate the market to the extreme, and therefore, he believes this will drive the market even higher.

Where is the Breaking Point for the U.S. Stock Market?

Bianco believes that the U.S. stock market cannot continue to inflate indefinitely and may eventually run into problems, but not at the moment. The market will only plummet rapidly if the FED is unable to continue printing money.

Most importantly, he emphasized that the current market has detached from reality, with all indicators already exceeding valuations, but that is not important at the moment.

He stated that although many data suggest the economy is rebounding, those are just people's self-serving biases (choosing to see the outcomes they like).

Under the current state of printing money to rescue the market, the trend is likely to return to pre-collapse highs or even reach new highs, but that is not the point.

It is important to watch for the timing of the change, which could be tomorrow or a year later.

Bianco said that while we may think that a good economy will lead to a good stock market, the FED believes the opposite, that a good stock market will lead to a good economy. By boosting the stock market, jobs and GDP will be created, improving the economic conditions. However, this is a mistake.

What worries him is that the FED knows there are risks with the printing money policy, but they do not intend to do anything about it.

Will Bitcoin Have a Breaking Point Because of This?

The assumption that Bitcoin's halving difficulty argument does not hold up because the cost of the main mining pools' computing power is far lower than the electricity cost data on the surface, and the selling off of other small and medium-sized mining pools will also have little impact.

Therefore, there is still room for movement in the cryptocurrency market, with the impact on the market from the news side attributed to the currency tightening due to the halving of block rewards, and further downward movement could also be attributed to the collapse of the U.S. stock market.

Although Bitcoin's role is defined as a hedge asset, it has not been able to play a hedging role in critical moments in the past. Investors should still diversify their investments across cryptocurrencies and traditional financial assets to reduce risks.