Recently, most analysts and other investment channels are rejoicing that the Fed has finished raising rates and will supposedly soon move on to lowering them.
Their logic is linear and understandable:
High key rate -> expensive loans.
And expensive loans are already serious: consumers have less money -> companies earn less -> companies save more -> they fire employees -> consumers have less money…. and then again in a circle.
This process has been going on for more than a year and there is a high probability that it will last 1-2 quarters.
You can get out of this “vicious circle” by reducing the rate, or simply printing money, as was the case in 2020-2021.
The Fed says rates will remain at high levels until mid-2024.
The global situation is worsening due to tightening financial conditions.
While there is no new money and the key rate is at a high level, conditions will continue to worsen.
It is quite logical for the Fed to start cutting rates now, so as not to aggravate the process.
It would also be more logical for him to stop printing money in advance in 2021 and not to accelerate inflation to such levels, because inflation began to grow gradually.
But Powell said that “everything is ok guys, don’t worry👌”, well yes....
🤔 What's the problem?
And the problem is, friends, that the US Central Bank is not a proactive body, but a late one.
It does not rely on forecasts, but solely on published data, which, unfortunately, always reflect not the present, but the past.
This is why in the end the Fed is forced to listen to the market because it is more flexible.
Look at the attached picture.
The chart since 2000 shows that markets always fall when the Fed cuts rates.
$BTC Bitcoin is too young an asset and has only experienced 2 periods of rate declines in its life. The result is similar - Bitcoin was flying down.
❓ Why is this so?
Because the Fed is a lagging body, it raises rates until something gets better in the economy.
This happened in 2000, in 2008, in 2020 and 2023-2024 will be no exception.
But in conditions where everything is deteriorating so rapidly, keeping the rate at a high level for a year... well, all that remains is to wish you good luck 🍀
Only when something breaks does the Fed begin to actively lower the rate in order to “save everyone” from its actions.
But as can be seen from the graph, when the rate falls, the market also falls, because cheap loans do not go to markets, but to heal wounds. 🤕🩸
By the way, Bitcoin and crypto may well fall under the distribution, since troubled companies will need money. We are 99% sure that most companies hold cryptocurrencies on their balance sheets without any ETF facts.
After this, the market “comes to its senses” for several more months, and only then a new bullish cycle begins for many years.
Now you know who really controls the markets and what you should watch closely.
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