The Fed’s interest rate hike expectations are not a decisive factor for Bitcoin?

Fed rate hikes intensify.

On January 10th, Eastern Time, Federal Reserve Chairman Powell spoke at the hearing, saying that the economy after the epidemic may be different from the previous expansion, the US labor market is strong, and policies must be considered forward-looking, and tools will be used to support the economy and employment. market. In fact, since the Fed released the early signal of raising interest rates last week, the market’s expectations for interest rate hikes in March have begun to rise sharply.

Goldman Sachs now expects the Fed to raise interest rates four times this year, in line with analysts at JPMorgan and Deutsche Bank. A tight labor market and rising inflation have fueled expectations that the Federal Reserve will become more aggressive in raising interest rates and shrinking its balance sheet. Bloomberg Economics said in a report that the Fed is expected to focus on its balance sheet at its January meeting and shrink it this time or sooner.

Panic turmoil in traditional markets spread to cryptocurrency markets. Bitcoin once broke below the $40,000/piece mark, the first time since September 22 last year, a drop of $29,000 from the high point in November last year, and a drop of more than 5% within the day. The market generally believes that once the Fed officially starts to shrink the balance sheet and raise interest rates to “cool down” the market, risk assets including cryptocurrencies may usher in a decline in expectations.

h7r8FQQpOQLCI6NPTziSN5VKOxM1HZR1NSKF7VGx.pngBank of America strategists like Michael Hartnett believe bubbles are bursting at the same time in assets including cryptocurrencies, palladium, long-duration tech stocks and other historically risky market sectors. Jay Hatfield, portfolio manager at Infrastructure Capital Advisors, said reduced liquidity from the Federal Reserve will lead to higher equity risk premia and interest rates, which will continue to disproportionately hit the market’s riskiest assets, including money-losing tech stocks, influencers , especially momentum-driven investments in cryptocurrencies with no intrinsic value.

Of course, there are also different voices. Gu Yanxi, a researcher and practitioner in the blockchain and encrypted digital asset industry, said in an article that don’t pay too much attention to the impact of the Fed’s policy on the price of Bitcoin. Bitcoin price is affected by many factors, but the Fed’s policy is not the main factor affecting Bitcoin, because there is enough money in the market to determine the price of Bitcoin . This is similar to the Fed’s policy will not affect the issuance of Tether. Even if the price of Bitcoin moves due to the announcement of Fed policy, the causality is spurious and temporary.

Gu Yanxi said: “If a major global regulator takes regulatory measures against a major cryptocurrency exchange, it will have a much greater impact on the price of bitcoin. But even so, the impact will be very short-term. .”

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