Given the low probability of a Fed rate cut in May, according to CME "FedWatch," investors should adjust their strategies in cryptoassets and other risk assets. The postponement of expectations for lower rates suggests a financial environment with higher rates for longer, which generally negatively impacts riskier assets due to the rising cost of capital and lower liquidity.
A prudent response involves considering a more cautious stance, which could translate into a reduction in exposure to cryptoassets and other risky assets with high volatility. Alternatively, or in combination, capital could be reallocated toward more defensive and lower-volatility assets, such as high-quality bonds or equities of solid companies. Diversification across different asset classes becomes essential to mitigate risk.
It is crucial to remain attentive to FOMC communications and economic data, as these will influence the future direction of monetary policy and could generate volatility in the markets. Active portfolio management, with the flexibility to adjust allocations based on emerging trends, will be essential to navigate this uncertain environment and protect capital invested in cryptoassets and other risky assets.