The Fed’s losses

Recently, the Federal Reserve reported that its losses have exceeded $200 billion, which has attracted widespread attention. The indicator called "Profits that the Federal Reserve should pay to the Treasury" shows that it is currently -201.237 billion US dollars, reaching a new low since statistics were collected. It is worth noting that the Federal Reserve has basically no precedent for losses in history. Normally, it earns interest income from providing services to the financial sector and holding treasury bonds and mortgage bonds, and returns the income that exceeds operating expenses to the US Treasury. However, the high interest expenses in this round of interest rate hikes have led to this loss.

The Federal Reserve has been raising short-term market interest rates to attract deposits in order to regulate the market, but has been under great financial pressure under the condition of low bond coupon rates. This situation has caused the Federal Reserve's losses to continue to increase because the interest it pays to financial institutions has exceeded the interest income it receives from the bonds it holds.

The transition from profit to loss

For many years, the Federal Reserve has been a "guaranteed winner". Supported by ultra-low interest rates and a large balance sheet, the Federal Reserve has paid nearly $1 trillion in profits to the government in the past decade. However, since 2022, the Federal Reserve has begun to raise interest rates to cope with persistently high inflation, and the benchmark interest rate has risen to a range of 5.25% to 5.5%. As interest rates rise, the interest paid to commercial banks on reserves increases, and the Federal Reserve's financial situation has reversed.

Although the loss is significant, Fed officials emphasized that it was only a paper loss and would not affect its ability to implement monetary policy. This view is also recognized in financial markets, as many investors still have confidence in the independence and stability of the Federal Reserve.

Employment data and the path of interest rate cuts

While the Fed is facing losses, the US non-farm payrolls data far exceeded market expectations. After seasonal adjustment, non-farm payrolls increased by 254,000 in September, and the unemployment rate fell to 4.1%. This strong data has caused new twists and turns in the market's view on the Fed's interest rate cut path. The market generally expects that the probability of a 25 basis point rate cut in November has reached 99.1%. Former US Treasury Secretary Summers said that although a rate cut is necessary, it should be handled with caution because nominal wage growth is still higher than the pre-epidemic level.

All this shows that the Fed's decision is not only subject to financial conditions, but also to changes in the job market and risks in the economic outlook. At the upcoming FOMC meeting, how to find a balance between controlling inflation and promoting economic growth will be a major challenge for the Fed.

Geopolitics and the impact on the crypto market

Under the dual pressure of the Federal Reserve's financial problems and employment data, global markets are looking for new investment opportunities. At this time, the cryptocurrency market has become the focus of many investors. Analysts at JPMorgan Chase pointed out that as geopolitical tensions intensify, investors may regard gold and Bitcoin as safe-haven assets. Against the backdrop of continued inflation, cryptocurrency, as a decentralized asset, is gradually gaining favor with more investors.

The Fed's interest rate policy directly affects market liquidity. Lowering interest rates usually prompts capital to flow into risky assets, which means that in the future market, cryptocurrencies may usher in a new wave of investment. Investors often look for relatively stable assets in uncertainty, and Bitcoin, as digital gold, is attracting capital that wants to avoid risks in traditional markets.

Future Outlook of Crypto Market

As global economic uncertainty increases, investors are increasingly interested in the crypto market. Research by CoinMarketCap shows that Bitcoin's bull cycle is accelerating and is expected to peak in May-June 2025. This optimistic expectation has led many investors to re-examine the potential of crypto assets.

At the same time, other crypto projects are also developing actively. For example, many DePIN (decentralized physical infrastructure network) projects have been launched on Ethereum, and although other platforms such as Solana and Polygon have a relatively small market share, they still provide room for competition. This shows that although the crypto market is still adapting to macroeconomic changes, its long-term potential remains strong.

Summarize

Overall, although the Fed's losses have sparked widespread discussion in the market, they will not directly affect the operation of the crypto market. As an emerging investment option, crypto assets are gradually becoming a safe haven for investors in the face of uncertainty. As global economic dynamics change, investors should remain patient and pay attention to policy changes and market dynamics to seize future investment opportunities.

In this context, with the complexity of geopolitics and changes in global liquidity, the crypto market may usher in new development opportunities. The future investment environment will be more diverse, and investors need to respond flexibly to gain an advantage in this battle for funds.