An Important Week for Financial Markets Hit By Risk Aversion

Since January 20, bitcoin, the main virtual currency, has been in freefall. It has lost 50% of its value compared to the high of last mid-November. At the same time, the financial markets have been worried throughout the past week. Everyone is nervously awaiting the meeting of the American Federal Reserve, the FED which is to announce on Tuesday 25 and Wednesday 26 its calendar and its measures to curb inflation, which has become a global phenomenon.

Economists call this risk aversion. Ordinary mortals will speak more prosaically of fear. Because it is the fear of inflation that makes the financial markets nervous. Bitcoin suffered from this, losing between last Thursday and this Sunday about half of its value compared to the high reached last November.

Fear of credit crunch measures
In the wake of bitcoin, all cryptocurrencies suffered a veritable stampede. Admittedly, digital assets are accustomed to these spectacular reversals, but this time the decline is guided by the fear of investors in the face of possible credit tightening measures that the FED could announce.

While US inflation reached 7% last year, its highest level in forty years, the US Central Bank must announce a schedule for raising rates. Under these conditions, investors want to protect themselves by positioning themselves on government bonds deemed to be more stable. But the fall in the price of bitcoin does not only make people disappointed. El Salvador, the only country in the world where bitcoin is an official currency, has just bought 410 more, for around fifteen million dollars.