On March 18, Federal Reserve Chairman Jerome Powell said at a press conference that the Federal Reserve expected to maintain loose monetary policy to promote the economic development affected by the coronavirus, and stressed that interest rates would remain close to zero until at least 2023.
Affected by the US government's $1.9 trillion stimulus plan, the market expects that there may be hyperinflation in the global economy, which may force the Federal Reserve to take early action to raise interest rates.It is worth noting that at present, the market's expectation of inflation has soared to the highest level in 12 years, and the Federal Reserve also predicts that the inflation rate will exceed 2% in 2021. However, the Federal Reserve still says that it is patient with the economy becoming hot and does not expect to raise interest rates in the next two years. This press conference also provides a tranquilizer for the market.
Dove's monetary policy stance has created favorable conditions for bitcoin prices to rise.Alan, chief researcher of currency security China blockchain Research Institute, told the researchers of Huaxia Times financial research institute that if the interest rate increase comes ahead of time, a large amount of funds from traditional institutions and retail investors may divert part of the funds back to the bank to buy more stable fixed-term financial products, and there will be a certain degree of outflow of funds in bitcoin and other cryptocurrency markets.On the contrary, the news that interest rates will not be raised in two years has created a good environment for the inflow of funds into the cryptocurrency market.It will be good for the investment market in the past year to switch to bitcoin and other assets due to the continuous depreciation of French currency.
- Bitcoin's anti inflation features are amplified
Although the Federal Reserve said it did not expect to raise interest rates in the next two years, Greg Jensen, CO chief investment officer of Jinqiao water, the world's largest hedge fund, recently signaled to the market that there might be a round of hyperinflation in the global economy.The Biden administration's fiscal stimulus will drive up consumer prices and threaten bond and stock market gains after the crisis.The market is not overreacting to inflation, and the actual rate of change in economic conditions and inflation will exceed the expectations of the market or the Federal Reserve.
Jiang Jinze, head of onchain research and strategy, said that the US Federal Reserve raised its medium - and short-term economic outlook in the early morning meeting on the 18th, and kept doves on the basis of monetary policy, trying to pacify the market and once again stimulated the animal spirit of the market.If we reduce the purchase of government bonds, as the largest long-term buyer leaves the market, the yield may quickly get out of control. Therefore, according to the statements of the Federal Reserve officials, investors do not need to worry about the withdrawal of the Federal Reserve's easing policy at least until the autumn, and the withdrawal of support for the market will certainly have an impact on the economy and financial markets.
Today, the price of bitcoin has stabilized above $58000. At present, bitcoin is recognized as a tool to hedge against inflation. The dove monetary policy stance is expected to promote the rapid rise of bitcoin price again.Mizuho Securities survey shows that nearly $40 billion of the US $1.9 trillion stimulus plan will flow into bitcoin and bond markets.
In this regard, Alan stressed that the U.S. government has recently signed a hotly debated $1.9 trillion rescue bill, which also includes a $1400 distribution plan for citizens.The U.S. government's continuous monetary easing "water release" policy has caused most retail investors to give up holding the constantly depreciating French currency and switch to bitcoin and other assets, which will bring benefits to the investment market in the past year.If there is a continuous inflow of funds into bitcoin, it will maintain and extend the bull market time of this round of market and bring more user traffic. it is undoubtedly beneficial to the price of bitcoin.
It is worth noting that despite the recent sharp rise in US debt, against the background of rising inflation risk, Jensen believes that the ability to use bonds for diversified investment has deteriorated significantly, and it is obvious that the ability to obtain returns by using bonds has declined.Labor friendly employment policies and slowing globalization mean that technological progress is the only force to curb inflation.And fiscal and monetary policy makers may provide more financial support until the limit is reached.
- Bitcoin is more pro cyclical
Morgan Stanley wealth management released a research report on the 17th that the threshold for cryptocurrency to become an investable asset class "is reaching.With the popularity of covid-19 in 2020, the feasibility of cryptocurrency as a qualified financial investment option can be consolidated.
As we all know, bitcoin not only has the hedging characteristics of digital gold, but also has the risk-seeking characteristics of bulk commodities. In different periods, the focus of the market is different, which also leads to the low long-term correlation between bitcoin and traditional assets.However, empirical data analysis shows that bitcoin is relatively more inclined to "procyclical" commodities, that is, when the economy accelerates to expand or is expected to be better, it will be sought after by investors.
According to coin metrics, a cryptocurrency data company, the price of bitcoin has doubled this year, but there is still room for further growth.Bitcoin fell nearly 20% from last week's all-time high of $60000, resulting in the MVRV ratio falling to 0.88."Historically, the best time to invest in BTC is the MVRV falling below 1.0."According to coin metrics, the MVRV index peaked in 2018, before the bear market began, and reached nearly six points in 2014.
The MVRV ratio represents the difference between the current price of cryptocurrency and the average price of bitcoin obtained.Generally speaking, when the price reaches the limit, traders may be inclined to profit, which will generate selling pressure, and the price will fall.
Recently, the negative premium of gray-scale GBTC and ether has also attracted the attention of the industry. However, the negative premium continues to narrow. On the 17th, the premium rates of GBTC and ethe were - 4.35% and - 3.52%, respectively.
On the 18th, the negative premium of GBTC and ether narrowed again, being - 1.91% and 0.60%
respectively.Alan believes that the recent negative premium of gray-scale GBTC and ether is mainly due to the increase of interest rate in the former US bond market and the withdrawal of funds from the OTC market to the low-risk and stable US bond market. Therefore, the negative premium of GBTC, ether and other risk targets has formed a certain pressure, causing the price to continue to fall or even negative premium.
Nice read. We are only getting started with this run in the crypto sphere!
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