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How will the Fed's new policy affect the "digital currency" market?



When investing, we must not only pay attention to the fields we invest in, but also pay attention to the macro-financial and economic environment, because the long-term trend of all investment markets is inseparable from the impact of the financial and economic environment.

When the general trend of the times comes, "the pigs on the wind will fly", this old saying is the truth.

Investors in the currency circle should pay more attention to this point, because the currency circle is the younger brother of all existing investment fields. Its volume is very small. As long as a little money spills into this circle, it will cause the entire market to skyrocket.

The speech delivered by the chairman of the Federal Reserve on the evening of August 27th, Beijing time was the trigger for the continued surge in global assets.

The speech of the chairman of the Federal Reserve has attracted great attention from all walks of life around the world before it was published, because everyone expects to observe the Fed's judgment and planning for future development from this speech, so as to formulate the next investment strategy.

After the release of the US PCE, the interest rate futures market still expects the Fed to raise interest rates by 25 basis points at its next meeting: Jinse Finance reported that according to the Fed’s observation: after the announcement of the annual rate of the US core PCE price index, the US interest rate futures market still expects the Fed to raise interest rates at the next meeting 25 basis points. [2022/12/23 22:03:50]

And this report did not disappoint everyone, and it really gave a clear answer, and this answer even exceeded everyone's expectations to some extent.

In the whole report, I think the most critical point is that the Fed changed the previous inflation target from 2% to an average inflation rate of 2%. In other words, low interest rates will be implemented for a long time, and the inflation target will be allowed to exceed 2% for a period of time.

This means that the Fed's regulatory policy will undergo major changes. In the past, when the inflation rate rose slowly and approached 2%, the Federal Reserve would take measures in advance to gradually tighten liquidity, striving to control the target within 2% or at most 2%. After this change, the Federal Reserve will allow inflation to continue to rise, exceeding 2%, and as long as the average inflation rate does not exceed 2% for a period of time, it may not tighten liquidity.

Fed Chair: Bond purchases will be reduced as economic recovery and goals are made substantial progress: Fed Chair Powell: We are firmly committed to maintaining average 2% inflation and we will reduce bond purchases as economic recovery and goals make substantial progress Buy. (Golden Ten) [2021/3/25 19:17:46]

After making this policy adjustment, the Federal Reserve can be said to have loosened its constraints again. Then it is reflected in the specific policy that it should continue to send money to individuals, continue to send money to enterprises, and continue to print money when it needs to be printed.

As soon as the news came out, the market first fell sharply because of worries about the pessimistic economic outlook, but then it rose sharply again: the same is true for US stocks, gold, and silver. The U.S. Dow Jones Index has risen to 28,653 points at the time of writing, which is less than 3% away from the historical high of 29,568 set this year.

Outlook for the Federal Reserve FOMC meeting: The Fed is expected to maintain its current policy unchanged: Recently, Fed officials have indicated that they will maintain monetary policy support, and earlier Powell also mentioned that it is still too early to tighten policy. Morgan Stanley analyst Ellen Zentner also believes there will be no change to the FOMC statement and that tapering of the bond-buying program may have to be announced at the December 2021 meeting. In addition, the Fed may not worry about the recent rise in Treasury yields and inflation expectations, as unprecedented stimulus measures have injected a lot of liquidity into the market, but have also improved the prospects for a strong economic recovery. Although new voters will come online in 2021, such as Evans, Daly, Bostic, Barkin and Waller, they are not expected to have a meaningful impact on policy decisions this year. (Golden Ten) [2021/1/25 13:26:20]

We should note that this was achieved in the context of a record high unemployment rate in the United States and a sharp recession in the economy. The U.S. stock market, which is a barometer of the economy, is completely distorted and cannot reflect the true state of the economy at all.

Why did the U.S. stock market go out of such a weird market? Robinhood, an investment platform that is enthusiastically sought after by young Americans, gave the answer: Young people in the United States put all the money issued by the government into the stock market.

I believe this is just a microcosm, and it reflects that the money used by the U.S. government to rescue the people and companies did not enter the real economy at all, but was all squeezed into the financial market.

The Federal Reserve’s policy of printing money without a bottom line has now formed a habit for the whole society: as long as I can’t do it, the government will send money; now that the economy is not good, the sent money will definitely not make money if it is invested in the entity, then Invest in financial market speculation. If the financial market crashes, the government will send money again..., so whether the market is good or bad, the government will print money.

The door to this endless loop has been completely opened. Voting in the US general election in November is about to open, and I don't think whoever is the next president will close the door. Regardless of whether the market will crash in the future, money will be printed correctly, and if the market does crash, the measures to print money may be even more beyond imagination.

Now that the epidemic has not been brought under control in the world, I believe that no matter how long the epidemic lasts, it will gradually dissipate one day, and when that day comes, the global panic will gradually subside and the economy will gradually return to normal. The money will flow unscrupulously like a flood to the whole world, including China. Therefore, even if my country's fiscal and financial policies are kept under control, it may be difficult to resist the large influx of external funds in the future.

With such a flood of funds, the stock market (including A-shares), gold, silver, and digital currencies may all usher in a big bubble.

Not only ordinary investors like me can feel this future scene, but many investment banks have also expressed similar views, including Raoul Pal, the former CEO of Goldman Sachs. It is worth noting that they now mention gold as well as bitcoin.

Bitcoin began to frequently enter the field of vision of these traditional investment elites, and the entire digital currency led by Bitcoin will definitely not miss this coming bubble feast.


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