Dow Jones Could Soon Enter A Bear Market

Traditional financial markets are experiencing a very bad end of the year. The Dow Jones has fallen around 18.77% in just a few months. It achieved an all-time high of 26,828 points back in October and it fell down to 21,792 on December 24, registering an intraday fall of 2.91%.

In general, in traditional financial markets, when there is a decline of around 20% from its all-time high, it can be considered a bear market. Although we are not in that territory yet, we might see it very soon.

Back on Monday 24, Steve Mnuchin, the U.S. Secretary of Treasury called top US Bankers in order to convene the Plunge Protection Team (PPT). The main intention is to be sure that all these banking institutions are able to support loans.

“Today I convened individual calls with the CEOs of the nation’s six largest banks,”

commented Mnuchin on the Christmas Eve.

According to Quincy Krosby, a chief market strategist at Prudential Financial, these efforts made by Mnuchin produced the opposite effect on the market. Most of the investors believe that they do not have confidence in the government’s plans to help the market recover.

At the moment, there are two important issues around the world that must be solved before the markets can recover. The first one is related to the trade war that China and the United States started a few months ago. The second issue that is generating instability in traditional markets is the Federal Reserve’s decision to increase interest rates two times more during 2019.

Donald Trump, the President of the United States, has been criticizing the Federal Reserve and its decisions. On December 24 he blamed that the economy’s poor performance was caused by bad decisions taken by the FED. Mick Mulvaney, the chief of staff, and the Treasury Secretary Mnuchin said that Trump is not able to relieve Jerome Powell from the position he has at the FED.

There are several experts that believe that in a bear market in the traditional financial world would not have a positive impact in virtual currencies. In general, it might be possible for those that are selling stocks to do it to gain liquidity rather than reinvesting these funds in other assets. However, if there is a currency or debt crisis, investors might pay close attention to virtual currencies as a hedge against monetary issues.

Since Bitcoin was created, the developed world did not experience a hard crisis such as the one lived back in 2008. Thus, it is not clear which will be the impact on the virtual currency market.

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