What does the Fed want to do? Views on recent medium to long term Liquidity and macro data

According to the previous research on the relationship between the Bit and the Nasdaq, the price trend of the Bit is very correlation with the Nasdaq index of US stocks, which is an amplifier of the Nasdaq Fluctuation, and the current high of the Nasdaq has fall 8.5% (currently fall to MA120, while the previous Bit has fall 18% from the highest 7.4w fall to the low fall ReboundBitReferring to the historical trend relationship between the Nasdaq and MA120, the probability of the Nasdaq re-Depth big dump is small, corresponding to the Bit, unless there is an extreme black swan in the market in the short term, or the Nasdaq continues to decline due to the impact of the first quarter earnings announcement of U.S. technology stocks this week, the possibility of big dump is small, and it may cooperate with the Nasdaq to Rebound and then make a direction choice.

(20231130, the relationship between Bit and the Nasdaq)

(20240422, the relationship between the NASDAQ trend and MA120)

Powell continued his hawkish speech on the 17th last week, maintaining his "caution" on future interest rate cuts At the same time, the Federal Reserve's Beige Book shows that U.S. consumer spending has barely increased, and the overall price pump is stable, generally moderate, and U.S. inflation is expected to maintain a slow pace in the future, which is far from the previous PCE indicator and CPI indicator.

(20240418, the New York Fed "previewed" a roadmap for withdrawing QT: the Fed may stop shrinking its balance sheet next year)

It is impossible to continue to raise interest rates, interest rate cuts are a certainty, and the closer the Fed gets to cutting interest rates, the more hawkish it will be. The expectation of a rate cut is affected by the data and the external environment, which is very slippery. At present, my view on the tightening of medium-term liquidity in the United States remains unchanged, and for the long wick candle in the United States, the intuitive observation data of future liquidity is the decline in bank reserve requirements and the change of the balance of the US Treasury from pumping to falling due to tax payment (that is, the liquidity change of medium-term balance sheet reduction).

(20240422, the structure of the Fed's debt side)

At present, the scale of balance sheet reduction is 95 billion / month, and the Fed's balance sheet reduction scale will be reduced by 30 billion per month from May, that is, about 65 billion / month, until the beginning of next year or the middle of the year, the Fed plans to reduce bank reserves from the current 3.5 trillion to 2.5-3 trillion range.

(20240409, Xiaohei Xinwen's views on the Liquidity of the market outlook)

Xiao Hei's 20240409's new article "Heatwave" mainly talks about three things.

1. Explanation of BTFP and near-term liquidity. It mainly explains that after the termination of BTFP, the Fed has recently injected liquidity into the market by changing the collateral rules of the discount window. The Fed eased bank capital requirements and exempted UST (Deposit Capital, used for bond purchases) from SLR (Supplemental Leverage) for covert money printing in the future. As long as government bond yields are not higher than the nominal GDP rise rate (real Intrerest Rate is negative), the prices of large long financial assets will continue to pump.

2. Another way to determine the source of liquidity comes from the amount of tax paid on the due date of the 2023 tax year for the period 20240415-20240501 + the speed of quantitative tightening QT + the balance of TGA. Paying taxes has reduced liquidity to a certain extent, but this recent reduction in liquidity will enter the TGA, that is, the account balance of the Ministry of Finance, which is currently about 750 billion USD, and with the slowdown in QT (30 billion USD per month since May), these will provide guarantees for liquidity during the year. The period of instability of risk assets is 20240415-20240501, and after 20240501, the Liquidity will gradually get better.

3.Bit Halving (20240420) tends to be bullish, but the current US dollar Liquidity is tighter, and the resulting Tied Up long effect will be stronger.

According to Xiao Hei, considering that the current Ministry of Finance 20240415-20240501 due to the increase in the amount of taxes paid long, the Liquidity reduced by bank reserves will be supplemented by the balance of the Ministry of Finance TGA, that is, the Liquidity source of Yellen's stimulus economy, before paying taxes, the amount of TGA is about 750 billion, and it will probably pump to more than 1 trillion after that, and the reduction of the TGA balance and the overnight reverse repo scale ON RRP will bring at least 1 trillion Liquidity to the market in the second half of the year.

I will also talk about my opinion, different from Xiao Hei's view, from the medium to long term, compared with the trend of bank deposit reserves and historical stock price trends, When bank deposit reserves enter a downward trend, the performance of the Crypto Assets market is often not too good, and may even be the beginning of a bear market For example, in 14-16 years, 18-19 years, 22-23 years (but 16-17 years are the opposite, I think there is a stimulus effect on the demand side after the bulk big dump), the role of bank deposit reserves is more important than the scale of overnight reverse repo and the balance of the Ministry of Finance, and it is a direct source of Liquidity for the demand side of borrowing, and the Ministry of Finance account balance to release Liquidity for the market, not to mention whether it can completely offset the reduction in the amount of deposit reserves, considering the hard spending of other aspects of the government, it is doubtful whether the share that can flow to the market can be long。

Therefore, taking into account the background of the medium to long term decline in bank deposit reserves, combined with the support effect of the Nasdaq approaching MA120, This round of Bit since the beginning of the market from 6w will be regarded as a Rebound at the macro level, the goal of the Rebound is not necessarily, while walking, 67000 is the strength and weakness of the current shock range, Bit stand firm MA21, after this position may have a new high, you can synchronize the next right side of the Nasdaq trend and then plan.

The difference of opinion with Xiaohei medium term does not affect the operation of our short term test position, but affects the Position of the medium to long term Maker below and the time control of the short to long turn, and affects the current short term Holdings position size and the requirements for risk control (for example, the expected profit of the altcoin Position Bit left side of the 6w in the near future may be reduced, and the setting of the original price stop loss after maintaining a certain profit, etc.).

(20240422, US 10-year Treasury yield US10Y trend)

We can see that since the epidemic, when US10Y exceeds 2%, that is, from February 2022, and then the Federal Reserve officially raises interest rates in March, the market has already reacted before this, releasing water leads to inflation, and inflation needs to be solved by raising interest rates and shrinking the balance sheet, and now US10Y is making a comeback, pump to about 4.6%, far from the hard target of 2%, and 3% away Liquidity 's soft target is not near, is it necessary to release liquidity and bring down the yield of government bonds by itself as it did in October and December last year? Unless the division is famous, it feels unlikely in the short term.

The short-term slow falling of US10Y has boosted short-term liquidity, but the big dump of US10Y is most likely due to black swans. At present, the trend of Bit and US10Y is seriously diverging, is it tempting long or out of the independent market? Combined with the judgment of the above-mentioned bank deposit reserves, ** short-term need to look again (do not leverage, do not think that there is a strong continuity), if the trend of last year's 10-12 months is replicated after May, perhaps this trillion or so Liquidity can have another wave of market, but to the medium term, this wave of pump I think there is a high probability of a wave of long market. **

The Unholy Trinity of Demand, Inflation and Debt is the main contradiction affecting monetary policy at present, and the three influence and contain each other.