TechFlow news, on February 18, according to DL News, Wolfgang Münchau, co-founder and director of Eurointelligence and financial columnist, published a new analysis article stating that the current market is in a dangerous bubble zone, and cryptocurrencies could become the trigger for the next financial crisis.
The article highlights three major risk factors:
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The meme coin market is now valued at $80 billion, with Dogecoin accounting for about half of the market cap and TRUMP reaching $3.8 billion. Münchau points out that unlike CDOs during the 2008 financial crisis, meme coins lack any rational foundation and are driven purely by influence. While their scale is not yet sufficient to threaten the global financial system, they have already caused market turbulence in countries like Argentina, where President Milei's involvement in a meme coin crash led to a stock market plunge of over 5%.
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Stablecoins, with a market cap of $225 billion, face significant systemic risks. Since their reserves are primarily invested in U.S. short-term Treasury bonds, they suffer from severe asset-liability maturity mismatches. If rising inflation prompts the Federal Reserve to raise interest rates, the value of reserve assets could sharply decline. This mechanism resembles the 1997 Asian financial crisis and the 2022 UK pension fund crisis, both rooted in asset-liability duration mismatches.
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The cyclically adjusted price-to-earnings ratio (CAPE) of the S&P 500 has approached 40, nearing the historical peak seen during the dot-com bubble and far exceeding levels during the 1929 Great Depression (25) and the 2008 financial crisis. AI-related stocks, represented by Nvidia, may be repeating the tech stock bubble of the late 1990s. Münchau argues that the open-source nature of AI technology and non-exclusive access to data make it difficult for current AI companies to sustain monopolistic positions.
Münchau believes these three seemingly independent bubbles could merge into a "super bubble." Factors such as Trump’s policies—including trade wars and excessive tax cuts—and relaxed cryptocurrency regulation could serve as triggers, potentially setting off a domino effect across the global financial system through rising inflation, bond market collapse, and stablecoin crises—mechanisms similar to those seen during the 2008 financial crisis might re-emerge.
