1/
The @federalreserve deliver its statement on monetary policy and updated economic projections on Wednesday
This has the potential to create a large, volatile move across markets, including $CRYPTO!
I'll do my best to explain the significance of this now
(RT appreciated)
The @federalreserve deliver its statement on monetary policy and updated economic projections on Wednesday
This has the potential to create a large, volatile move across markets, including $CRYPTO!
I'll do my best to explain the significance of this now
(RT appreciated)
2/
Since the outbreak of the COVID-19 pandemic the US Federal Reserve has stimulated the US economy like never before, with the goal of leading the US economy out of a recessionary environment.
Since the outbreak of the COVID-19 pandemic the US Federal Reserve has stimulated the US economy like never before, with the goal of leading the US economy out of a recessionary environment.
3/
In the process of delivering the monetary stimulus, the FED has promoted financial risk-taking and provided the catalyst for a sustained bull run 🔥
Up until this point, I dare say that most have benefited from such risk-taking… which is great!
In the process of delivering the monetary stimulus, the FED has promoted financial risk-taking and provided the catalyst for a sustained bull run 🔥
Up until this point, I dare say that most have benefited from such risk-taking… which is great!
4/
The risk-taking by investors has been mostly attributable to the record low interest rates allowed by the US Federal Reserve’s monetary policy tools like Quantitative Easing (QE), for example.
Low rates mean cheap access to cash!
The risk-taking by investors has been mostly attributable to the record low interest rates allowed by the US Federal Reserve’s monetary policy tools like Quantitative Easing (QE), for example.
Low rates mean cheap access to cash!
5/
This risk-taking is all well and good while rates remain low, but in the case that interest rates move higher, this previously cheap access to cash (debt) can quickly become unserviceable (too expensive) for investors to hold onto.
This risk-taking is all well and good while rates remain low, but in the case that interest rates move higher, this previously cheap access to cash (debt) can quickly become unserviceable (too expensive) for investors to hold onto.
6/
Hence the current market dynamic of everyone being loaded up to their ears with debt and hoping that the Federal Reserve don’t screw them by hiking rates.
Why would the FED need to hike rates you ask? ....
Hence the current market dynamic of everyone being loaded up to their ears with debt and hoping that the Federal Reserve don’t screw them by hiking rates.
Why would the FED need to hike rates you ask? ....
7/
To keep a lid on inflation is the main answer, runaway inflation can lead to all sorts of issues for an economy including, but not limited to severely reducing the purchasing power of the nation’s reserve currency.
To keep a lid on inflation is the main answer, runaway inflation can lead to all sorts of issues for an economy including, but not limited to severely reducing the purchasing power of the nation’s reserve currency.
8/
Arguably, inflation in the US is running the highest level in decades.
This has mostly been attributable to record government spending and stimulus, which has allowed easy and cheap access to cash, therefore inflating asset and commodity prices.
Arguably, inflation in the US is running the highest level in decades.
This has mostly been attributable to record government spending and stimulus, which has allowed easy and cheap access to cash, therefore inflating asset and commodity prices.
9/
Last week’s US Consumer Price Index (CPI) reading, which measures household inflation, recorded at a 13-year high of 5%.
The biggest year on year increase since 2008! 🔥🔥
Last week’s US Consumer Price Index (CPI) reading, which measures household inflation, recorded at a 13-year high of 5%.
The biggest year on year increase since 2008! 🔥🔥
10/
The Federal Reserve have talked down inflation during early 2021, as being ‘transitory’ and nothing to be concerned about, but now, we have the makings of a compelling case for them to AT LEAST begin talking about changing their stance to monetary policy...
The Federal Reserve have talked down inflation during early 2021, as being ‘transitory’ and nothing to be concerned about, but now, we have the makings of a compelling case for them to AT LEAST begin talking about changing their stance to monetary policy...
11/
What will spook markets is NOT the action of the FED but instead, their COMMENTARY at tomorrow’s FOMC meeting.
If the FED begin to play along with what reporters are asking about ‘tapering’ and ‘hiking’ the markets (including $CRYPTO) will be spooked.
What will spook markets is NOT the action of the FED but instead, their COMMENTARY at tomorrow’s FOMC meeting.
If the FED begin to play along with what reporters are asking about ‘tapering’ and ‘hiking’ the markets (including $CRYPTO) will be spooked.
12/
At tomorrow’s meeting there is a 93% probability that the FED leave rates UNCHANGED!
At tomorrow’s meeting there is a 93% probability that the FED leave rates UNCHANGED!
13/
As we know, low rates mean higher risk-taking and higher rates means less risk-taking
Therefore if it looks like the FED are becoming increasingly talkative about shifting their stance (speak hawkishly) the market will instantly shift to reducing their risktaking (risk-OFF)
As we know, low rates mean higher risk-taking and higher rates means less risk-taking
Therefore if it looks like the FED are becoming increasingly talkative about shifting their stance (speak hawkishly) the market will instantly shift to reducing their risktaking (risk-OFF)
14/
In a risk-OFF environment, $CRYPTO and equities (as well as other risk-sensitive assets) will suffer, as investors protect themselves against the possibility of higher interest rates.
In a risk-OFF environment, $CRYPTO and equities (as well as other risk-sensitive assets) will suffer, as investors protect themselves against the possibility of higher interest rates.
15/
The macro-environment is still very much conducive to risk-taking, even if the FED do speak more hawkishly tomorrow.
It is likely that tomorrow's meeting will be only impactful on a micro-scale (short and sharp sell-off, followed by a recovery in risk sensitive assets)!
The macro-environment is still very much conducive to risk-taking, even if the FED do speak more hawkishly tomorrow.
It is likely that tomorrow's meeting will be only impactful on a micro-scale (short and sharp sell-off, followed by a recovery in risk sensitive assets)!
16/
I’m not trying to tell you to sell now or be scared, this is just a piece of the macro-puzzle to consider.
Stay safe!!
Hopefully this was helpful 😀
I’m not trying to tell you to sell now or be scared, this is just a piece of the macro-puzzle to consider.
Stay safe!!
Hopefully this was helpful 😀
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