Viewpoint: The current market is in a dangerous bubble area, Crypto Assets may become a new systemic risk trigger point

On February 18, according to DL News, Wolfgang Münchau, co-founder and director of Eurointelligence, and financial columnist, published a latest analysis article pointing out that the current market is in a dangerous bubble zone, and Crypto Assets may become the fuse for the next financial crisis. The article identifies three major risk factors: The meme coin market is now valued at $80 billion, with Dogecoin accounting for about half of the market value and TRUMP worth $3.8 billion. Although the scale is not yet sufficient to threaten the global financial system, it has already had a negative impact on markets like Argentina. The market value of stablecoins has reached 225 billion US dollars, facing significant systemic risks. Due to the fact that the reserves of stablecoins are mainly invested in US short-term treasuries, once inflation rises and prompts the Fed to raise interest rates, it will lead to a substantial decline in the value of reserve assets. This asset-liability mismatch risk is similar to the 1997 Asian financial crisis. The S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio is close to 40, which is close to the all-time highs of the dot-com bubble. AI stocks, such as Nvidia, could repeat the history of the tech bubble of the late '90s. Münchau believes that these three seemingly independent bubbles may merge into a “super bubble”. Trump-related policies (such as trade wars, excessive tax cuts), relaxed cryptocurrency regulation, and other factors could all become triggers, leading to a domino effect in the global financial system through rising inflation, bond market collapse, stablecoin crisis, etc., similar to the transmission mechanism of the 2008 financial crisis.