Talk about the impact of rate cuts on the crypto market

The reason why I believe rate cuts are good for the market, especially long-term risky assets, is that we are gradually returning to the monetary conditions of 2020. It may take a lot, and we may never reach these levels, but at least we are closer to them. I often see people compare this cycle to the previous one, when in fact the monetary conditions are completely different.

In 2020, due to the epidemic, the money supply suddenly increased, and the interest rate was 0%. Basically, there was more money in the market and borrowing money was free. With the significantly lower cost of borrowing, people were more likely to speculate on risky assets. This is why we have such a frenzy for BTC and a real altcoin season.

This is not necessarily the case now. Monetary conditions are different, which is why it is difficult to compare today with 2020-2021. The money supply has stabilized over the past few years because there is no need to print money like in 2020. At the same time, interest rates have been at their highest levels since the outbreak of the financial crisis in 2007. In addition to the high cost of borrowing, there is less money in circulation. More and more people are unemployed and personal savings are also decreasing.

How can money flow to risky markets? This is why we mostly see institutions bidding up BTC and ETH, while most altcoins lag behind. Interest in risky assets has been low simply because people cannot afford to risk putting their money in them. This is easy to see by just looking at BTCD. This is completely different from 2020, when the economy did not slow down, but the market overreacted due to the epidemic.