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The Fed Fed Chocolate to Floki Inu

In many prior discussions about crazy speculative cryptocurrencies like Floki Inu (CCC:FLOKI-USD), I forwarded the idea that the brutal honesty of the FLOKI community is a positive.

An image of a corgi wearing a horned viking helmet above text saying Floki Inu on a black background.
Source: Zie Project/ShutterStock.com

When you have other projects floating around magic blockchain words in a bid to save the world, something like Floki Inu is refreshing.

Yes, I’m sure some are holding onto the meme coin (well, technically token per Coinmarketcap.com’s description) as a badge of honor and identity for a greater purpose. But I think most reasonable people understand what’s going on. When you have publicly traded assets exchanging hands for fractions of a fraction of a penny, red flags must go up.

If they don’t, that’s not anyone’s fault except that of the unreasonable speculator.

Still, Floki Inu deserved its place in the discussion thanks to its extraordinary popularity relative to its fundamentals. Therefore, it was always possible – though probability is a different argument – that with relatively small cash outlays, you could expose yourself to the crypto narrative as opposed to say buying a whole unit of Bitcoin (CCC:BTC-USD) and hope that it would rise 10% or 20%.

I could be wrong but most people would probably sleep easier putting a few thousand dollars at risk rather than $50,000 or $60,000. Undoubtedly, those thousands put into Floki Inu (a bad idea, let me just state for the record) will be stomach churning. But if you lose, it may not necessarily destroy your life.

Well, that argument made most sense so long as Bitcoin and the other established cryptos continued chugging along. But as of this moment, the situation is not looking good. With the Federal Reserve releasing its minutes for its December meeting, somebody fed the poor dog a chocolate bar.

Aggressive Hawkishness May Divert Funds Out of Floki Inu

I really don’t want to read into any one news event, especially with cryptos. However, Bitcoin was already in a precarious condition before the Fed released its December minutes, struggling at the $46,000 level. At time of writing, the benchmark coin dipped below $43,000.

Anyone reasonably familiar with technical analysis knows that Bitcoin desperately needs to climb above the $50,000 mark. Right now, the 50- and 200-day moving averages (common market health gauges) stand at $50,484 and $48,071, respectively. So, further pain below these thresholds will likely spell trouble for speculative cryptos like Floki Inu.

Now, the reason why cryptos and the rest of the equities sector is printing red ink is that Fed officials believe inflation readings and a tight labor market (that is, a labor market at or near full employment) could warrant interest rate increases “sooner or at a faster pace than participants had earlier anticipated.”

Logically, higher rates suggest higher borrowing costs, which would cool speculation in risk-on assets. You can’t get any more risk on than Floki Inu.

But that’s only part of the equation. The bigger component is that if Bitcoin continues to tumble, taking along other established cryptos, there will be fewer and fewer incentives to speculate on FLOKI. Why? Because its risk profile in a deflating environment would make gambling on it costlier.

Essentially, if Bitcoin gets to my previously discussed (possible) downside target between $15,000 to $20,000, discount-hunting contrarians would much rather have BTC at this rate than Floki Inu at whatever price it would end up.

Ultimately, when you’re dealing with intensely speculative investments like cryptos, more of your gambling money should be directed toward the established, credible hands. Bitcoin is it, Floki Inu is not.

Keep a Watch on Your Holdings

How this all plays out will depend on whether the Bitcoin bulls show up or if they bail out. If the latter, there’s a huge possibility that many (if not most) of the meme coins that recently sprouted would die of irrelevance. I’m not so worried about Bitcoin disappearing as it’s already established mainstream recognition (and in limited cases, integration).

But Floki Inu? Without any hard feelings, if we encounter a deflationary wave in cryptos, I’d be surprised if FLOKI makes it through the night. Again, if the established coins and tokens incur a steep discount, the smart money would load up on those assets first. Whatever is remaining may go to the junk coins.

But with over 16,000 of these things floating around, there’s absolutely no guarantee that Floki Inu will capture speculator demand. Keep that in mind as you watch the latest crypto drama unfold.

On the date of publication, Josh Enomoto held a LONG position in BTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

Article printed from InvestorPlace Media, https://investorplace.com/2022/01/the-fed-chocolate-to-floki-inu/.

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