In a recent macroeconomic analysis, Pechman discussed the deflationary situation in China, which economists believe is a concern. Domestic consumption is decreasing, and it seems that investors are hoping for a miracle from the expansion of their central bank’s balance sheet.
Pechman argues that the deflationary state in China will have short-term and medium-term effects on commodities, including Bitcoin, as well as stocks reliant on global economic growth. “It’s not a good time to hold stocks dependent on global economic growth or to use excessive financial leverage,” warned Pechman. “And perhaps it’s not a favorable time to hold commodities either. So, expect negative impacts in the short and medium term on Bitcoin prices if China’s growth declines.”
On August 9th, the National Bureau of Statistics of China reported that the Consumer Price Index (CPI) of the country had decreased by 0.3% compared to the same period last year in July – the first time since February 2021.
Furthermore, Pechman also explained the impact of the U.S. Federal Reserve’s expansion of its balance sheet to assets like Bitcoin. According to him, the U.S. Treasury is facing significant demands as the government spends more than it earns. Therefore, there will come a time when the U.S. government has to reverse some of its debts instead of continuing to shrink the scale of the Fed’s balance sheet.
In Pechman’s view, inflation will be most affected when the Fed is compelled to increase the scale of its balance sheet. This analyst advises individuals holding scarce assets like Apple stocks, real estate, gold, and Bitcoin to hold on tightly, rather than being deceived by the current deflationary period.