Why the Fed’s interest rate cut 🔑 is expected to fail to drive the currency circle’s rise❓
🧫Influencing factors
1. Keep interest rates unchanged: The Federal Reserve decided to maintain the current federal funds rate target range, which means there will be no significant change in market liquidity, helping to maintain market stability.
2. Reduce security holdings: Continuing to reduce security holdings can help reduce excess liquidity in the market, thereby easing inflationary pressures.
3. Focus on inflation and employment balance: The Fed is focused on achieving the 2% inflation target while maintaining low unemployment, which indicates that monetary policy will continue to be cautious to avoid over-stimulating or tightening the economy.
"These views present the Fed's assessment of the economy and monetary policy and future plans."
🟡Although the chairman of the Federal Reserve hinted that it may cut interest rates in September, the price of the currency circle still fell.
1) Adjustment of market expectations: Investors may believe that even if interest rates are cut, it will not be significant and will not significantly improve market liquidity.
2) Macroeconomic uncertainty: Slowing global economic growth, geopolitical risks and other factors may trigger risk aversion in the market, and cryptocurrency has also been affected.
3) Short-term risk aversion: Investors may believe that U.S. stocks are more certain in the short term after interest rate cuts, because companies’ financing costs are reduced and profit expectations are rising, leading investors to invest more money in the stock market. The cryptocurrency market is more volatile, so it is chosen to transfer funds to US stocks.
4) Arbitrage and reallocation: Some investors may take advantage of interest rate cut expectations for arbitrage, first making profits in the cryptocurrency market, and then transferring funds to U.S. stocks in the hope of obtaining more stable returns. After interest rates are cut, the stability and expected returns of traditional markets (such as U.S. stocks) may attract investors' funds instead of the cryptocurrency market, resulting in reduced liquidity in the currency circle.
🔫Comprehensive impact
Although interest rate cuts are good for the overall market, the cryptocurrency market may decline in the short term due to reduced liquidity as funds flow to traditional markets.
In the long term, if interest rate cuts boost economic growth and improve overall market sentiment, the cryptocurrency market may benefit later. Therefore, in the long run, the current cryptocurrency token prices are still at a high level. Long-term investment can provide good returns. Sooner or later, the water of interest rate cuts will irrigate the currency circle. Stay stable and hold on to the coins in your hands.
