The monetary policy meeting of the Federal Reserve will be held soon, and the market value of encryption will fall below 1 trillion dollars
The Federal Reserve will hold a new monetary policy meeting from September 20 to 21. It is widely expected that the Federal Reserve will raise interest rates by 0.75 percentage points for the third time in a row to combat high inflation. The monetary policy meeting is just around the corner. BTC fell below $19000, ETH fell below $1300, and the total market value of cryptocurrency fell below $1 trillion.
In terms of market sentiment, on September 19, the panic and greed index was 21 (27 yesterday), and the degree of panic was higher than that of yesterday. The level of panic turned from panic to extreme panic.
Earlier, analyst ted talksmacro tweeted that the US Federal Reserve will release its decision on US monetary policy next week, which will affect Bitcoin and other cryptocurrencies. At present, the market has mostly digested the 75 basis points interest rate hike, and has discounted the possibility of 100 basis points interest rate hike. According to the FedWatch tool of Chicago Business Exchange, the probability of interest rate increase of 100 basis points is only 18%.
The policy of the Federal Reserve plays a key role in the current crypto market. It is worth noting that, in order to curb high inflation, in addition to raising interest rates to the level limiting economic activities, most of the 44 economists surveyed believe that the Federal Reserve will maintain interest rates at their peak levels for a period of time. The easing of price pressure, instability of financial market and deterioration of labor market are the most likely reasons for the Federal Reserve to suspend its tightening action. However, 68% of respondents said that it is expected that the Federal Reserve will not reduce the federal funds rate until 2024 at the earliest. A quarter of them do not expect the Federal Reserve to cut interest rates until the second half of 2024 or later.
Not long ago, Lawrence Summers, the former US Treasury Secretary, opposed the Federal Reserve's failure to adopt a radical monetary tightening policy, saying that any hesitation would cause greater economic losses. Summers said: "In history, there have been many, many instances of excessive delays in the adjustment of inflation policies, and they have paid a very high price." Economists predict that Federal Reserve Chairman Powell and his colleagues will raise the benchmark interest rate by 75 basis points next week, raising the upper limit of the target range to 3.25%. Interest rate futures show that policymakers will push it to 4.5% by the spring of 2023. Summers said: "We are more likely to end at more than 4.5%, rather than at less than 4.5%. If the interest rate must reach more than 5, I will certainly not be surprised."
In this regard, Rabobank said that it had further raised its forecast of the Federal Fund Rate of the Federal Reserve. It is expected that the Federal Reserve will raise the interest rate by 75 basis points next week, but the risk of raising the interest rate by 100 basis points still exists. The bank said it expected that the upper limit of the target range of the federal funds interest rate would reach 5% next year, instead of 4.50% previously predicted in the long term. The reason for this prediction is that the bank believes that the wage price spiral has begun, which will keep inflation high. In addition, given that the Federal Reserve clearly places the task of fighting inflation above achieving full employment, this will push the Federal Reserve to raise its current interest rate expectations, and it will not change the hawkish monetary policy stance until 2024.
At the same time, Joachim Nagel, governor of the German Central Bank, said that the European Central Bank must respond firmly to the possible double-digit inflation rate later this year. He said on Sunday: "If the data trend continues, there must be more interest rate hikes - this has been agreed in the management committee. In October and beyond, we must make up our minds." "We must rein in inflation. We must not relax, even if the economy deteriorates," Nagel said
In addition, the chief economist of the European Central Bank, Jean Lian, said that the European Central Bank would raise interest rates "several times". He said in an interview that the European Central Bank is still in the stage of raising interest rates. He referred to the forecast of the International Monetary Fund, saying that he could not rule out the possibility of a mild recession in the euro area.
Against this background, Jeffrey Gundlach, a billionaire and the "new king of debt", warned that the risk of deflation had increased, and it was time to bear on the stock market. Gonak also said that it is too early to join the cryptocurrency boom, because the Federal Reserve may further raise interest rates. When asked whether it is a good time to buy cryptocurrencies in the current market conditions, Gonak responded, "I will definitely not buy cryptocurrencies today." When the Federal Reserve changes from the policy of interest rate increase to its "free currency" policy, it will be the time to buy cryptocurrency.
It is worth mentioning that Benjamin Cowen, an encryption analyst, said that it is expected that ETH will witness great pain because Bitcoin (BTC) and the stock market are in a downward trend. Since the volatility of Ethereum is significantly higher than that of Bitcoin and the stock market, Cowen pointed out that the key technical support of ETH is further than other assets. Analysts said that Ethereum would suffer the most from the decline of all risky assets.