Fed launches Taper crypto market liquidity turning point or coming

At 3 a.m. Beijing time on Thursday, the Fed announced the minutes of the November FOMC meeting, further revealing that monetary policy makers announced the launch of Taper (the Fed’s actions to reduce the size of bond purchases and the Fed’s balance sheet, which means that the Fed is slowing down Slowly reduce the intensity of easing).

The minutes of the meeting showed that Fed policymakers admitted that high inflation in the United States may last longer than previously expected, and if necessary, it will speed up the pace of reducing the scale of bond purchases (Taper) and raise interest rates ahead of schedule.

The reason for paying attention to Taper, Huobi Research Institute William told Golden Finance that Taper means that the liquidity of the U.S. dollar is diminishing on the margin. Although this change does not change the direction of expansion or contraction of liquidity itself, it may change the flow or flow of funds. The degree of asset mismatch. Especially for Bitcoin, an alternative high-risk asset, its sensitivity to changes in U.S. dollar liquidity will theoretically be higher (as we observed during March last year, due to the shortage of market liquidity, Bitcoin The price dropped by nearly 50% in one day). 

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During the Fed’s last round of Taper implementation (2013-2014) Bitcoin price trend source: Wind Huobi Research Institute

From the figure, we can clearly see that the time when the Federal Reserve officially announced the launch of Taper in December was the culmination of Bitcoin’s bull market in 2013, while during the previous round of Taper, Bitcoin was deeply caught in a bear market.

The minutes of this meeting are different from the past, and clearly point out the “early interest rate hike schedule.”

The minutes show that some participants suggested speeding up the pace of debt purchases, so that the FOMC can be in a better position to respond to the need to adjust the federal funds rate, especially under inflationary pressures. Many participants pointed out that if inflation continues to be higher than the committee’s policy goals, the FOMC should be prepared to adjust the speed of Taper, and at the same time adjust the target range of the federal funds rate (rate hike) earlier than expected.

The last FOMC meeting this year will be held on December 14-15, when a new period of economic forecasts and bitmaps will be announced. Half of the FOMC committee members expected to raise interest rates in 2022 in September, and this group is expected to expand further next month. The swap contract price shows that the current market expects the Fed to raise interest rates three times (25 basis points each) in 2022.

Huobi Research Institute William pointed out: “Accelerating Taper means speeding up the launch of QE, which means that the turning point of liquidity will be advanced. Therefore, under the influence of market expectations, various high-risk assets represented by Bitcoin will become It is difficult to continue to rise, and it is not even possible to rule out the possibility of further decline.”

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/fed-launches-taper-crypto-market-liquidity-turning-point-or-coming/
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