Cryptocurrency Market Warms Up: Unexpected Consequences of Federal Reserve Operations
The Federal Reserve (Fed) of the United States recently quietly purchased $43.6 billion in government bonds during a calm market, an act seen as secret quantitative easing (QE) aimed at increasing the money supply.
According to reports, this action sharply contrasts with the quantitative tightening policy that has been in place since June 2022. Currently, the Fed's balance sheet stands at approximately $6.7 trillion. Due to the U.S. Treasury auctioning $150 billion in bonds but only selling $78 billion, the Fed intervened to cover a $72 billion gap, preventing market volatility.
At the same time, Moody's downgraded the U.S. credit rating from 'AAA' to 'AA1', causing the U.S. to lose its 3A rating from the three major credit rating agencies. The market is fragile, and without significant positive news, U.S. government bond yields may rise further. Against the backdrop of this 'secret QE', global risk markets are rebounding, with cryptocurrency performance particularly notable. Some analysts believe that the Fed's low-key operations may accelerate the rise of crypto assets.
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