With the recent announcement of the Federal Reserve’s aggressive interest rate hike policy, the turmoil in the global financial market has intensified, and the crypto market has also continued to perform sluggishly in the near future. How is the wave of interest rate hikes transmitted to the market? How do professional investors view and survive the bear market? What will be the market trend after the tide of interest rate hikes? Welcome everyone to take these questions to learn about our National Day special activities.
The latest “Coin Xiaobai Let’s Talk” is also our National Day special event, with the theme of “What will happen to the crypto market with the emergence of global interest rate hikes?” The special guests are Phyrex_Ni, a well-known data analyst in the industry, and Henry, a well-known analyst. The following is a wonderful summary of the live video:
Question 1: Throughout the second half of this year, the overall situation of the crypto market can be said to be sluggish and sluggish, a direct reason is that the Federal Reserve raised interest rates aggressively to curb inflation, and just raised interest rates by 75 basis points last week, accompanied by follow-up interest rate hikes by the United Kingdom, Switzerland, South Africa, Vietnam and other countries, how do you view the wave of interest rate hikes that will follow in 2022?
Phyrex_Ni: In fact, we can see that it is mainly because of this inflation, and the interest rate hike is actually the Fed’s ability to use not many weapons for the entire macro situation, especially for US inflation. For the Federal Reserve, the main thing is to raise interest rates and shrink the balance sheet, especially recently when we see the shrinkage of the balance sheet, in fact, the positioning has been set very clearly, that is, to raise interest rates by 25 basis points, once or twice, that is basically 50 at most, so we all switch to interest rate hikes.
Then we also know that this overall inflation this time is caused by supply chain problems, and the supply chain is because of geopolitical conflicts. The Fed itself has no way to intervene in this geopolitical conflict, so what it can do is to give the White House or the ruling party in the United States more time to see if they can solve the supply chain problems caused by the geopolitical conflict. If we can’t solve the problem, we can only reduce the entire demand and reduce the rise in prices from the level of reducing the economy. For example, we can see that this terminal rate can be raised by raising interest rates, which can lead to the mortgage of the house. We all know that the mortgage interest rate is now 6.5%, which has come to a relatively high position in the history of the United States, so there will be a certain stimulus for the decline of the entire housing market.
We also know that the CPI is divided into broad CPI and core CPI, then in this, housing and food account for a relatively large proportion in the broad CPI, and after excluding food and energy in the core CPI, housing mainly accounts for the majority. Therefore, we can see that if we can reduce the CPI purely from the level of reducing the CPI, if we can reduce the house, including the rent, it will actually be a great help for the CPI.
In terms of energy, we can also see that the main ones are oil and natural gas. Although the United States is a producer of oil and natural gas, its volume is still relatively small, and it still needs the coordination of OPEC and other aspects. Therefore, the United States attaches great importance to energy, including Europe. But there is no way to solve the interest rate hike from this supply side, it can only make everyone travel less and reduce the demand for oil products, so as to stimulate middlemen to lower this price. So now the rate hike itself can only be in a broad sense – that is, to put the entire economy on hold, or what we call a temporary downward range. Let’s see if we can reduce the needs of Americans in this regard.
At the same time, it is also for the dollar to rise. We have also seen a series of problems with the rise of the dollar, and all non-dollar currencies have a certain depreciation compared to the dollar. And then the question arises – the global capital is moving back to the dollar. Therefore, for interest rate hikes, it is difficult to directly control inflation, and it can only control the trend of the economy through it to see if inflation has a downward range.
From the current point of view, the United States has not raised interest rates in March to the present, and there has not been a significant decline in the overall inflation, for example, from the highest 9.3% to the current 8.3%, that is, it has dropped by one percentage point, but it has not been said recently since the United States said at the beginning that it wants to control inflation to 4% in 2022, because it is basically impossible. On the contrary, we think that it is good to be able to control it to 7% or 6%, so this means that the Fed will not continue to raise interest rates aggressively. He will also maintain the terminal rate for a certain amount of time. That’s why we can see the last two Fed officials, including Powell, say that it could take a long time to cut interest rates, and that there are no plans for a rate cut even in 2023. So this year, we can see that if we are more optimistic, it is that the CPI data is better. Then the next two rate hikes in November and December this year are likely to be 100 basis points, that is, 50 + 50, if pessimistic, that is, the already expected is 125 basis points, then this is 75 + 50. Even if inflation is not able to come down effectively, and even has the possibility of rising, it is 75 plus 75 in the worst case.
That’s how I see the whole situation with this year’s rate hikes, thank you.
Henry: What I’m thinking about is that since the last 75 basis point rate hike, the Fed has been directly addressing inflation and not caring about the global market economy as a whole. The indicator of the dollar that night was also a state of constant growth, so it also indicated the attitude of the market, and a state of global downturn. However, the upper limit of this rate hike is 3.25%, which is 1.15% short of the 4.4% expected at the end of the year. That would mean that the last two rate hikes this year will be at least 75 basis points and 50 basis points, at least once as Ni said. But judging from Powell’s speech after 2:30, he has some meaning to care for the market. On the one hand, he expressed a determination to reduce inflation to 2%, and on the other hand, he cooled these hawks so that the market side was not so panicked. Therefore, in this speech, the hawks also have a slightly dovish feeling of easing the market, but the overall state is still neutral and weak.
However, we can still see the magnitude of this interest rate hike, which is already a market expectation. The biggest expectation lies in the matrix of this starting point, but the future is also subject to change. On the market’s side, it was also in August that the Fed and Powell’s speech gave a serious data suppression. I also hope that the interest rate expectations on the hawkish side will give some dominant market and some sentiment in the future.
Question 2: The second question let’s ask Phyrex_Ni, as a professional investor and analyst, what other key indicators are you most concerned about, such as CPI values, how these indicators are transmitted and released in the market, and what can you share with you?
Phyrex_Ni: The end of the interest rate hike in September, as well as the terminal rate trend brought by the dot plot, the sentiment of the risk market continued to appear optimistic, with the US stock market closing in the early morning, driven by the Nasdaq BTC and the ETH trend almost returned to the price before the rate hike, and did not fall below the low of yesterday’s rate hike day. In this way, although the terminal rate of 4.4% (4.5%) is enough to make 2022 desperate, it is not without a silver lining.
Let’s take a look at the challenges and opportunities that we may encounter in the timeline from now on, so that we can act accordingly. First of all, we all know what Powell said in his speech, the dot plot does not represent the final implementation of the plan, but it does not necessarily represent the Fed’s forward-looking considerations. After all, for the current Fed, fighting inflation is the top priority, and raising interest rates and shrinking the balance sheet are weapons prepared to achieve this task.
We all know that a large interest rate hike will bring about an economic recession, an increase in unemployment, and political instability, and the Fed members who are studying interest rate hikes every day must be more aware of the impact behind interest rate hikes than we do, and the dot plot reflects the resistance of these FOMC members to inflation that is likely to be unable to be suppressed by conventional means. As the saying goes, long pain is better than short pain. Eradicating inflation quickly and in a short period of time is the Fed’s top priority. Therefore, we can also know a consensus within the Fed that the CPI in October is likely to continue the trend in September, that is, the year-on-year decline in CPI may indeed occur, but the decline will not be large, and even signs of a rebound cannot be ruled out. The core CPI is likely to continue to rise. And there is no interest rate meeting in October, so the first three weeks of September and October are not so important.
After all, in the previous Fed meeting, the tolerance for unemployment has been raised. Therefore, the first key point is the July housing price trend announced on September 27, although the delay of this data is lower than the current CPI, but it can still not be judged September CPI data for reference, especially from the house price trend in the chart, it can be seen that house prices have shown signs of falling since March, and house prices in June have shown a large decline. Because house prices and rents are highly correlated, and the housing index, which includes these two components, accounts for the largest proportion of CPI and core CPI, it is a slight exaggeration to say that the trend of housing basically determines the trend of CPI. At the same time, the trend of house prices in the S&P/CS20 major cities in July, as well as the sales of new homes in August, are also very helpful for speculating on the CPI in September.
In particular, there is still a long time before the price of the house is passed on to the rent. What’s even more troubling is that the rent trend in August has broken through the all-time high of rents since 1990, which means that inflation remains high. Therefore, this data on September 27 may not cause much change in the market, but it will be a good warning time for investors who are considering buying the bottom or selling risky assets.
Then there is the core PCE data to be released on September 30, also because there is no interest rate meeting in October, so the core PCE data can not be very volatile to the price, but the data has a strong guidance for the trend of the core PCE data in October and the CPI data in September, especially the Federal Reserve has publicly stated that it will pay more attention to the core PCE data compared to the CPI data.
Although the number of unemployed has been prepared to be raised, the Fed’s control of unemployment in 2022 will still be kept within 4%, so the September unemployment rate and the September non-farm payrolls data to be released on October 7 are the upper limit considerations that determine the Fed’s interest rate hike on November 3, that is to say, in the case of CPI equality, the lower the unemployment rate and the stronger the non-farm data, the more likely it is that the Fed will choose to raise interest rates by 75 basis points in November.
Therefore, if the unemployment data falls and the non-farm payrolls data strengthens, then even if it has little impact on the trend of the risk market at that time, it will be my expectation of opening a position for the first time. And if the unemployment data rises to 4%, or even higher (unlikely), then after this data appears, regardless of the non-farm payrolls data, it will be my first time to open a position, and the volume of positions will be lower, and betting on unemployment may force the Fed to pivot.
Then there is the PPI data released on October 12, which can be used as a precursor to the CPI data, if the PPI data shows a large decline, it will help to weaken the CPI corresponding to the sales and services of manufacturers, and can even be used as a standard for judging the price of food and new cars, and food is second only to housing in the largest proportion of the CPI.
The next day, October 13, is the most important date of October, when the September CPI will be released. Through the three data of unemployment, non-farm and PPI, the amount of the first position has basically been determined, and the CPI data has determined whether to open a position according to this share. The first thing to pay attention to is the year-on-year CPI data (CPI annual rate), followed by the month-on-month CPI data (CPI monthly rate). These two data figures are the main considerations for opening a position.
For the currency market data, the most important thing is still the situation of funds, especially the entry of external funds and the reduction of on-site funds. From the data point of view, after experiencing the change in macro sentiment caused by interest rate hikes, although USDT once again showed signs of market value expansion, it was offset by the market value of the USDC fell below $50 billion, and the market value level of BUSD also showed signs of continuous weakening of the market value of the main stablecoin, and the market funds continued to lose.
Finally, with the shock of Nasdaq futures after the closing of the U.S. stocks, it can be seen that Nasdaq futures actually have a new low after raising interest rates, but I don’t know if it is the reason for the overfall BTC and the ETH have seen a situation of rising or not falling, so we still need to be cautious. From an emotional point of view, BTC has moved away from the bearish situation and has a bullish trend, and although there are still more investors in the ETH are bearish, it is no longer a very strong bearish trend.
Question 3: We know that bull-bear conversions are a major feature of the crypto market, what is Henry mainly doing in the recent ongoing bull market?As a professional analyst, how do you view and survive the bear market?**
Henry: I’m currently working with some other senior people, mainly doing some contracts and secondary market investments. Because the market is not very good now, it is in a state between a bull and bear market. Therefore, at this time, it should belong to the state of learning more, huddling together to keep warm in the cold winter, and making a fortune together in the bull market.
First of all, we have studied the fan social part last year, and you can also see the good news in this area in the near future, and secondly, I will do some contract trading during the bear market, and the most successful case is that I rushed to the ETH square at 3000U, and then shorted to 3 digits, and then got 2000U before the ETH merger from 3 digits, and sold it immediately. Therefore, I think that in a bear market, you can learn more about your favorite content, such as contracts, spot investment, secondary market, and GameFi. Once you learn the knowledge in your own mind, in the bull market, each sector will have a linkage rise, and you will get your corresponding wealth.
**Question 4: As of now, the trend of the crypto market is still not very optimistic, and the expectation of subsequent interest rate hikes continues to be high.
Phyrex_Ni: It is the U.S. presidential election, judging from the trend of the 16th U.S. presidential election since 56 years, during the period of 3 to 12 months of the presidential election, it has a strong driving force for the risk market, especially for U.S. stocks. So what about this time, it happens to be covered by the halving cycle of the BTC. That is to say, from March 2023 to March 2024, basically according to history, it will have a more promoting effect on U.S. stocks, and the BTC halving cycle is also in 2024, and we also know that the first half and second half of BTC halving cycle is a time when the outbreak is more intense. So during this time, there happens to be a relatively good merger, so it will be affected by the favorable impact of a presidential election first.
Secondly, judging from the current tone of the Fed, the Fed has promised that it will not bail out the market in 2023, that is, when inflation is not controlled to 2%, the Fed will not raise interest rates and reduce the overall rate. This means that the terminal rate will remain at 4.6%, or 4.75% until 2023, until inflation is brought below 2%. So this situation is a “cause”, so what about the “effect”? That is what the Fed means is: I will not reduce in 2023, but it does not mean that I will not reduce in 2024. So if the Fed keeps inflation within 2% as expected in 2023, it means that the Fed will start cutting interest rates in 2024. That means that when interest rates are cut in 2024, there will be a positive for the market, even if it is not a release. It will also be good for a market.
Then there is another one, that is, if we look at the measures taken by the Federal Reserve after raising interest rates and reducing interest rates in the past, we can see that it is very clear that when the Fed shrinks its balance sheet when raising interest rates, we can see that it shrinks and takes back the “water” that has been released. And when interest rates are cut, especially when the economy is to be stimulated, the method of releasing water will be adopted. At this time, in fact, when Powell was on some unofficial occasions, they had already said this. Why? Because relative to the U.S. stock market. They are more focused on controlling inflation, because inflation is a long-term and very difficult data to control. But for the stock market, as long as I release water, I give you enough benefits, and I give enough water, then the U.S. stock market will basically return from the low point to the high point within half a year. We can look at the history of U.S. stocks, and we can know that every time there is a big release, U.S. stocks will soar to a very high level, and the speed is very fast. Therefore, from the perspective of 2 and 3 links, relatively speaking, 2022 may be the worst year, because we know that we have been facing interest rate hikes and balance sheet reduction and some policy uncertainties of the Federal Reserve. So although 2023 may not be the worst, in the case of maintaining a high interest rate, the purchasing power and buying sentiment in the overall market may not be particularly high, but from a falling market to an upward market, it should also happen in 2023.
This means that there will be a good expected behavior. So let me look at it personally, I think the bottom range is likely to be in 2022, and then in 2023, although it is not the bottom, it may be a slow and volatile trend, and there may not be a big increase in 2023, but relative to the bottom, it may come out of a bottom range, and the outbreak is likely to be in 2024, this is my opinion, thank you.
Henry: On my side, the focus is still on some intentions in the United States, and at the same time, I am more concerned about some hot topics in the near future. At present, in November, there may be a wave of the World Cup coming soon, that is, fan tokens, I think there is another wave of increases, and the degree of increase may not be too high. But if you’re looking at it as a short-term speculation, I think you can think about it. Secondly, if I have any outlook for the market outlook, I think 2023 may be a cold winter year. That is, whether there will be a good trend in the BTC or ETH Fang, I don’t think it will be, just like Ni Da said that it is a simple market, and it may not be until 2024 BTC it will usher in a new wave of bull market.
In other words, I may pay more attention to contracts and transactions in this secondary market, such as the fan tokens I just mentioned. I’ve even heard before that when the 20 major time nodes are around, there may be a crash BTC, but everyone can hear it this way, the reason for this crash, I will look for some more relevant data in the near future, or some K-line trends of the market and this specific analysis. When the time comes, I’ll send it to the host and ask him to help promote it.
Question 5: Last question, do you have any experience or suggestions for users and investors who are in the context of rapid bull and bear conversion and continued sluggish market performance in the short term?
Phyrex_Ni: Actually, I’ve been saying that opportunities and risks go hand in hand. For example, if you buy BTC or buy ETH, you are ready for a long time, that is, you buy it now, and you are ready to be covered, then I think relatively speaking, even if it is not the bottom of the range, but I think after all, it is the period when the Fed has gone to the end of raising interest rates, so the space that can fall in terms of sentiment and macro is actually quite limited.
Then this time is for us to give an example, that is, in 2021, if you are given a stage to go back to 2019 to buy coins, that is, I will give you back to any day, you may be willing. Because you know it’s going to be 69,000 in 2021, right, so you don’t care, in 2019 you’re going to buy for 3,000 or 19,000, because you’re going to make money in 2021, so I said if I can give you a chance to go back to 2019, although I won’t give you any one day, but you’ll be willing. In fact, this principle is basically the same, that is, I may buy a quilt cover for a period of time now, and it may even be more than a year of quilt cover, if you are ready for this, I think it is not necessarily wrong to start some now, because no one knows where the bottom is.
Starting from October 13th, the CPI has fallen sharply, then it is likely that the Fed’s interest rate hike will be reduced at this time, so we may now see that it may be a low, then it is also possible that the CPI will rise on October 13th, then the Fed will change from 75 basis points to 100 basis points, then October may be the lowest time. So we can’t know what price is the bottom, but what time and what trend is the bottom.
At present, even if it is not a real bottom, then it is not very far from the bottom. If you don’t mind it, you just don’t want to be trapped, or your funds are limited, or you don’t like to lock up your funds, then I think it’s better to wait, but if you wait, we may not be able to copy the real bottom. That’s nothing more than the problem of stability and risk, these two can never be the same, you can only say to achieve a balance as much as possible, you want to take less risk, then it means that your profit may be relatively small, if you want to get greater returns, then you will be relatively high risk.
This is my advice to everyone, that is, your own investment behavior, to see if you are not so anxious to withdraw this money? The length of time of the quilt is not within your expectations? If it is within your expectations, then you can enter the market at any time. If you feel that this is not what you expected, you can wait a little longer. Okay, thanks.
Henry: What is my advice to you? If you are ready to make a long-term investment, you can go and buy it directly, no matter what the price, as long as you stick to the industry and are optimistic about the currency, you can still buy it directly. If you are a long-term regular investor, the same is true, no matter what the price, then if you are the kind of speculative extreme and investment stage person, you need to figure out what you want to invest in? The structure, or the analysis trend of the industry, and this kind of macroeconomic fundamentals are almost understood, and you have some information, and then you invest in the currency you want to buy, so that although it cannot be said to be 100% safe, it may also be 67% of a profit probability.
I still think that if it is a bear market, everyone should learn more. Then the bull market reaps the fruits of your learning.
Conclusion: Okay, thank you very much for the wonderful sharing of the two guests, and thank you for the company of all fans and friends, today’s live broadcast of our National Day special is over, let us look forward to the return of the bull market, and finally wish everyone a happy National Day and a happy holiday in advance!
