Central bank bigwigs insist 'no significant interest rate cuts'? The cryptocurrency market still has to continue drinking this 'high-interest bitter medicine'!
Brothers, I am the Great Sage! Today let's talk some hardcore stuff. A member of the Bank of England named Taylor recently made a statement, and the core message is: 'Don't expect us at the Bank of England to cut rates drastically! We don't need to, and we are not willing!' This sounds tough, right? But for our cryptocurrency market, especially for those brothers hoping for 'massive easing' to boost prices, this absolutely does not count as a 'strong medicine' in the short term; rather, it serves as a reminder that 'you'll have to drink a few more bowls of this bitter high-interest soup'!
In plain terms: why does he insist on his stance, and why is our cryptocurrency market 'nervous'?
'Money in the bank is more appealing' effect: Once Taylor said this, the market started to murmur: Oh no, the interest in the UK isn't going down anytime soon! Think about it, if the interest for saving money in the bank or buying stable government bonds is still relatively high or decreases slowly, who would still want to throw a large amount of money into volatile assets like Bitcoin or Ethereum? With 'risk-free' returns high, the 'opportunity cost' of engaging in high-risk cryptocurrencies is rising! In simple terms, the less profit from buying cryptocurrencies feels even more painful!
'Fearful' syndrome is spreading: The more central bank bigwigs emphasize 'no rush to ease', 'inflation is still a concern', the market's risk appetite, in simple terms, is the 'daring to bet' spirit, which is easily suppressed. Think about why the cryptocurrency market fell apart in 2022? Isn't it because global interest rates rose, causing everyone to move money to safer places? Taylor's 'hawkish' remarks advocating tightening or hesitating to ease policies are adding fuel to this 'risk aversion' sentiment. When the overall market shrinks, 'pioneer risk assets' like Bitcoin often bear the brunt!
The pound might 'rise', while the dollar faces increased 'ally' pressure: If the UK doesn't significantly cut interest rates, with relatively high interest, it might attract international money, leading to a stronger pound. Although the direct impact on the dollar-denominated currency prices may not be significant, a strong pound or dollar often indicates that the global 'tight monetary' environment hasn't changed, or that risk aversion is still present. This is definitely not good news for cryptocurrencies that rely on 'liquidity easing expectations'. Just like when everyone expected the Fed to ease, the cryptocurrency prices jumped; now that the UK says 'I can't turn off the tap', it somewhat dampens optimistic sentiments.
'Easing expectations' have been poked with a small hole: Why does the market anticipate interest rate cuts? It's just thinking that once the central bank eases, there will be more money, which has to find a place to flow, and some can flow into the crypto market to drive up prices! Taylor directly said 'we don’t want or need to ease significantly,' which is equivalent to cutting down the market's expectation for the 'UK's faucet' to open. When expectations are dashed, even if it's just a part, it’s enough to make the market 'shake'. The pullback in March this year was partly due to the cooling of the market's expectations for Fed rate cuts, right? The principle is the same!
My personal opinion and practical case:
Short-term pressure is highly likely: I think, this level of official's hawkish stance, although it’s just 'one voice' among the nine members of the Bank of England, will ultimately need to vote, but in the current market environment that is extremely sensitive to 'interest rate cut timing' and 'magnitude', it's like throwing a small stone into a calm or fragile lake, creating ripples for sure. Think about it, when a certain Fed member made a somewhat hawkish statement recently, didn't BTC often respond with a slight drop? This shows that emotions and expectations are leading the short-term trends.
Don't be scared by a single voice; look at the 'leading boss': Pay attention! This is crucial! Is the Bank of England important? Yes! But who really has the 'power of life and death' over global risk assets, including our cryptocurrencies? It's the 'leading boss'—the Fed! The Fed is the master valve of global liquidity. If the Fed sings a loud dove song about easing rates quickly and significantly, then this member from the UK can be as tough as he wants, but his influence is limited. It's like the village chief saying this year's harvest is average in the UK, but the county chief (the Fed) says there's a bumper harvest in the whole county and money will be distributed; the villagers will definitely listen more to the county chief!
'The wolf is coming' effect is accumulating? Now global central banks are playing 'expectation management', with various members coming out to test the market. After hearing so many voices saying 'it might not cut that much/that quickly', the market may become increasingly 'tough' and numb, or more inclined to wait until there is concrete evidence of a meeting, voting, and actual rate cuts before taking action. This increases the difficulty of operations for those who like to speculate on expectations in the crypto market.
Therefore, Taylor's statement of 'no significant interest rate cuts' has cast a layer of cautious shadow over the cryptocurrency market in the short term, and it seems that the 'high-interest curse' will have to stay for a while. But is this a 'tornado warning' or just a 'slight cool breeze'? It still depends on how the Fed bigwigs perform at the end of the month!
Brothers, what do you think? Will the Fed ignore the 'reserve' of little brother UK and start the 'easing carnival' alone? Or will global central banks continue to 'tighten their belts' together? Let's discuss your judgment in the comments! Follow me, and in the next issue, we'll focus on dissecting the Fed's direction, which is critical to determining the 'lifeline' of the cryptocurrency market!
