Federal Reserve report dampens enthusiasm, warning signals in the crypto space light up!
Last night, the Federal Reserve's meeting minutes rang alarm bells for those trading cryptocurrencies. The report states that in the coming years, it is highly probable that: interest rates will remain high, corporate cost pressures will continue, and the economy may still 'catch a cold' for a few more years. These three factors together are not good news for high-risk assets like Bitcoin; making money will become increasingly difficult.
The Federal Reserve released a report early yesterday morning (called the meeting minutes), saying a lot, but summarizing it boils down to three points, each one feeling like a cold shower for the market:
1. High interest rates will persist: It’s not that they will continue to raise rates, but the current high interest rate of 4.25%-4.5% is expected to last for a long time (potentially several years). Lowering rates? Don't get your hopes up.
2. Corporate cost pressures are significant: Although tariffs imposed by the Americans haven't risen as quickly as imagined, cost pressures remain, and it's a slow but steady process that is gradually affecting the global supply chain. This situation itself is pushing prices higher, making the Federal Reserve hesitant to lower interest rates.
3. Can we avoid an economic recession? Hidden in the report is a rather alarming statement: the unemployment rate may remain quite high until 2027. This almost explicitly suggests that the economy may experience a 'hard landing'—meaning that the economy is struggling while the number of unemployed individuals continues to rise.
Impact on cryptocurrency trading
1. The story of Bitcoin being 'anti-inflation' is quickly losing its appeal:
The report directly debunks the notion that 'Bitcoin can resist inflation like gold.' You see, with high corporate costs and squeezed profits, when major institutions on Wall Street are short on cash, they will certainly be the first to sell off volatile assets like Bitcoin. What safe haven? When it comes down to running out of money, Bitcoin is often the first asset to be disposed of.
2. High interest rates are a chokehold, funding is quickly 'dying of thirst':
With interest rates this high, it’s practically like a chokehold on the crypto space! Those who were hoping for big institutional players to come in and drive prices up (you know, the narrative of an 'institutional bull market') can take a break. The cost of borrowing for these institutions is so high now, why would they risk buying cryptocurrencies? Isn’t it more appealing to buy some government bonds and earn interest steadily?
