Interpretation of cryptocurrency market on March 23, 2023
This morning, the Federal Reserve raised interest rates by 0.25%. In a subsequent speech, Powell mentioned that he would not consider lowering interest rates this year and continued to maintain the 2% inflation target and other hawkish remarks. But he also released positive signals. For example, it no longer mentions continued rate hikes are appropriate for this matter but changed to "some additional tightening policy may be appropriate." The market was also interpreted as a hint of a pause in interest rate hikes in May. This result has been expected, and the market is also according to the optimistic interpretation. The Nasdaq was rallying during Will's speech. The overall performance of crypto was oscillating.
But then it fell, and bank stocks led the decline. Former Fed Chair Yellen caused the drop. Yellen said the Treasury was not considering or proceeding to expand deposit insurance unilaterally. Likely, the current banking crisis is not as severe as it seems, so there is no need. However, the market interpreted it as positive, and the Nasdaq and crypto turned it down.
In contrast, the Federal Reserve's policy makes more sense because the banking crisis will also ease with the cessation of interest rate hikes and rate cuts. The premise is that if the problem does not continue to worsen for the time being, it is also premature to carry out too much policy assistance. The cessation of interest rate hikes and rate cuts is destined to happen, and last night also deepened this market judgment.
Does the interest rate curve stop rising at 5% or 5.25%? Precisely at what month it starts to twist downward is no longer particularly important as long as the eventual trend can be broadly consistent with the chart, not so high as to appear to go sideways for six months. Or continues to remain up such an exaggerated error, the established judgment does not need to change - still bullish on the market.
But then it fell, and bank stocks led the decline. Former Fed Chair Yellen caused the drop. Yellen said the Treasury was not considering or proceeding to expand deposit insurance unilaterally. Likely, the current banking crisis is not as severe as it seems, so there is no need. However, the market interpreted it as positive, and the Nasdaq and crypto turned it down.
In contrast, the Federal Reserve's policy makes more sense because the banking crisis will also ease with the cessation of interest rate hikes and rate cuts. The premise is that if the problem does not continue to worsen for the time being, it is also premature to carry out too much policy assistance. The cessation of interest rate hikes and rate cuts is destined to happen, and last night also deepened this market judgment.
Does the interest rate curve stop rising at 5% or 5.25%? Precisely at what month it starts to twist downward is no longer particularly important as long as the eventual trend can be broadly consistent with the chart, not so high as to appear to go sideways for six months. Or continues to remain up such an exaggerated error, the established judgment does not need to change - still bullish on the market.