The producer price index (PPI) is falling at the fastest pace since 1948, leading experts to warn of a severe economic reset. The rapid decline in the PPI is a concerning indication of the current state of the financial markets.
Notably, the bottoming of the high-beta inflation gauge may draw parallels to the financial crisis trough in 2009, according to senior Bloomberg commodity strategist Mike McGlone on May 9, who outlined that this is a worrying sign for investors.
McGlone suggested that the current market conditions may lead to a similar financial crisis and revealed that Bitcoin (BTC) might potentially hint at when the PPI will reach its bottom.
“Bitcoin could help provide guidance on the outlook for further declines. When and where the high-beta inflation gauge bottoms may draw parallels to the financial crisis trough in 2009.”
Using Bitcoin to gauge market sentiment
Bitcoin, the world’s largest cryptocurrency, has become a popular tool for predicting market trends due to its decentralized nature and lack of government control.
With its decentralized nature and fixed supply, Bitcoin has been touted as a hedge against inflation. As the PPI declines, Bitcoin’s value could increase as investors look for a safe haven asset.
McGlone stated:
“The history of financial market busts that follow liquidity-driven booms is playing out in rapidly declining commodities and producer prices. It’s a question of how extensive the dump will be.”
He added:
“Commodities, down about 25% the past 12 months, are getting low if history is a guide, but the BCOM peak from June 2022 suggests PPI for next month, released on July 13, may approach the July 2009 nadir at minus 6.9%.”
The history of financial market busts that follow liquidity-driven booms is playing out in rapidly declining commodities and producer prices. This is a warning sign for investors who may consider to re-evaluate their portfolio and looking to diversify into safe-haven assets like gold or silver.
Gold neared an all-time high as US interest rates soared to their highest in over 20 years. Earlier this week, McGlone highlighted how gold could outshine Bitcoin in a downturn.
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