At 23:00 on March 3rd, Beijing time, the Fed unexpectedly announced a rate cut, cutting the federal funds rate target range by 50 basis points to 1.00-1.25%, while reducing the excess reserve ratio (IOER) by 50 basis points to 1.1%.
This is the fourth rate cut implemented by the Fed since 2008, and also the first emergency rate cut by the Fed since the birth of Bitcoin in 2009 . After the news came out, the price of Bitcoin rose briefly from $ 8,700 to nearly $ 8,900, and then quickly fell back to $ 8,700. As of press time, the price of Bitcoin is still $ 8,700.
An emergency rate cut is an extraordinary move in extraordinary times. In the history of the Federal Reserve, count this time a total of nine emergency interest rate cuts were announced, and each time it was related to a major risk event at the time .
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Let's first review the recent major emergency rate cuts in the history of the Federal Reserve.
The bankruptcy of Lehman Brothers in September 2008 was later seen as a hallmark of the global financial crisis. The Federal Reserve announced an emergency rate cut in October of that year.
In January 2008, the subprime mortgage crisis intensified, and the Federal Reserve cut interest rates urgently, lowering the federal funds rate by 75 basis points, far exceeding the market's previous forecast of 50 basis points.
On September 11, 2001, the "9.11" terrorist attack broke out in the United States, and then the Federal Reserve announced an emergency rate cut.
The Fed's explanation for this rate cut is that the new crown virus and countermeasures will drag down economic activity for a certain period of time. The rate cut is to help the US economy stay strong in the crisis.
After the news of the emergency rate cut news was released, for a while, the voice of watching more bitcoins re-emerged.
For example, the Fed's emergency cut in interest rates caused market shocks, and Bitcoin is even more worth looking forward to. Another example: the first emergency interest rate cut since the financial crisis to save the market, or push the crypto market back to a bull market.
Is this really the case? Let's first look at the impact of the Fed's recent interest rate cuts on the price of Bitcoin.
3 interest rate cuts, Bitcoin fell more or less
For the 10 years from October 2008 to 2018, the Fed never took any interest rate cuts (including emergency interest rate cuts) until 2019.
In August, September, and October 2019, the Fed announced three interest rate cuts in a year.
On August 1, after the Fed announced interest rate cuts, Bitcoin broke through the $ 10,000 mark, and Bitcoin has risen by 18.59% in the period since.
On September 19, the Fed announced a second rate cut during the year, when the price of Bitcoin was hovering at $ 10,000, and Bitcoin fell 28.11% for a period of time thereafter.
On October 31, the Fed announced the third interest rate cut during the year. At that time, the price of bitcoin was around $ 9,000. Bitcoin has fallen by 29.65% over the period.
( QKL123 : Bitcoin price trend after the Fed's previous interest rate cuts)
When first cutting interest rates, Tom Lee, co-founder of Fundstrat Global Advisors, believes that the Federal Reserve's recent interest rate cut is a positive for Bitcoin (BTC).
"Bitcoin is increasingly becoming a macro hedging tool that investors use to guard against possible problems. Interest rate cuts have increased liquidity. Liquidity is driving money into all these risky assets and hedge assets, which is helping Bitcoin."
The positive result is that since the Fed's first interest rate cut last August to the present, the price of bitcoin has fallen from $ 10,000 at that time to $ 8,800 today.
Will it be different this time?
Unlike the previous three interest rate cuts, this one is an emergency one.
In response to this, post-98 crypto analyst Yi Dong believes that the 50-bp rate cut by the Federal Reserve is not really urgent. As early as mid-February, investment banks such as Goldman Sachs, Nomura, and Bank of America predicted that the Federal Reserve would The interest rate cut was 50 basis points in March. Yesterday Powell also mentioned that he would negotiate with the global central bank on the interest rate cut, so this is a global event that concerns you and me. From the perspective of the historical cycle, whenever the economic growth faces severe challenges, the Fed will take action, especially when we are in a period of low inflation. The current uncertainties are still very high. If the global epidemic continues to intensify, especially the economic data of developed countries led by the United States begins to weaken, the Fed is likely to cut interest rates again by 25 basis points at the end of March to meet the challenge of market instability .
Former Cinda Securities chief blockchain expert and managing director of the Digital Renaissance Foundation, Cao Yin said:
"This is the first emergency rate cut since the birth of Bitcoin, and the fourth rate cut since the Fed entered the rate cut cycle last year. According to Powell's statement yesterday, the Fed will continue to cut rates later, and it cannot rule out other more aggressive currencies. Policy tools. "
How does a rate cut affect Bitcoin?
Cao Yin thinks it is good.
" Bitcoin is a purely financial asset with no practical purpose. Funds have the greatest impact on Bitcoin . Even if the Federal Reserve's emergency interest rate cuts bring market panic, the risk appetite of the entire market will be severely hit. However, due to BTC The spot holders are not traditional financial investors, so they will not be influenced by the sentiment of the financial market. Although market sentiment will affect the position of BTC derivatives, as long as the spot does not sell, the price of btc is at most a large amplitude. Point, it will not plummet like the Dow Jones. "
But Dong thinks that the interest rate cut has no direct relationship with Bitcoin.
" At present, there is no direct evidence that can prove that the Fed's interest rate cut has a crucial impact on the trend of Bitcoin , because Bitcoin was born in early 2009, it has not experienced the financial crisis of 2008, so there is no good reference object. Generally come It is said that the Fed's interest rate cut will have a short-term support effect on US stocks, which can ease the confidence of current stock market investors. At the same time, because interest rate cuts mean loose money and further inflationary pressure, it is a short-term good for gold.
But at present, Bitcoin has not been affected by the interest rate cut, and there is a clear increase in purchases. You can see this intuitively from the trend on the evening of March 3. In the past three Federal Reserve interest rate cuts (for example, 19 years), the price of bitcoin has not rebounded. On the contrary, its return rate will even be negative. As a result, Bitcoin has not been significantly linked to the Fed's interest rate cuts. " Remember that when Bitcoin was born, Satoshi Nakamoto left such a sentence in the genesis block: "The Times 03 / Jan / 2009 Chancellor on brink of second bailout forbanks (On January 3, 2009, the Minister of Finance was in the process of implementing On the brink of a second round of bank emergency assistance. "
Satoshi Nakamoto did not explain the meaning of this sentence, but Bitcoin believers have since regarded it as a mockery of a reality-centric financial system.
Today, the global economic situation is turbulent, and whether Bitcoin will become a Noah's ark that avoids global financial risks is still inconclusive.
Will the halving bull market come?
There are still 67 days before the third halving of Bitcoin, which is considered by some players in the currency circle to be the last big opportunity to profit from Bitcoin.
Looking back at the halving of bitcoin's history, it has brought a huge wealth effect.
On November 28, 2012, Bitcoin was halved for the first time. In the following two years, the price of Bitcoin increased by 90 times .
On July 10, 2016, Bitcoin was halved for the second time. In the following two years, the price of Bitcoin increased by 28 times .
( QKL123 : Half Countdown to Bitcoin)
Obviously, after each halving of Bitcoin, the price has ushered in a huge increase, but the increase is getting lower and lower .
This time, the conservative estimate of many people in the industry is that Bitcoin will rise to US $ 3-5 million, which corresponds to the current price increase of 2.5-4.6 times.
However, this increase is no longer attractive, and it is not even as high as some stocks of A shares.
According to the author's observation, some of the big money circle enthusiasts who entered the market in 2017 for investment and quantification have gone out of the money circle and ran for A-share speculation .
Although it seems that the Shanghai stock index of A shares has not risen much in 2019, 5 times shares and 10 times shares cannot be said to be everywhere, but also a lot.
In particular, since some high-tech technologies have been exposed by the "stuck neck" problem, China's support for 5G, new energy, cloud computing, artificial intelligence, semiconductors, integrated circuits and other high-tech industries has been unprecedented. A-shares have embraced these concepts. Of stocks have been heated up by various funds. The purchase of technology-themed funds, especially ETF funds, is extremely popular.
After the outbreak of the new crown pneumonia epidemic, many experts predict that the epidemic will have a great impact on China ’s real economy, but A-share investors will be happy to do the funeral. After the Spring Festival stock market opened, the speculation continued. The latest data show that the trading volume of Shanghai and Shenzhen has exceeded one trillion yuan for ten consecutive days .
In contrast to the bitcoin market, the voices of large institutions have been incessant, but it is still unknown who the large institutions are. Mining machine manufacturers are preparing to halve their efforts, and even a certain miner offers a triple-axe of "mining machine lease + installment payment + buying miner's options" to attract miners to buy. At present, Bitcoin's computing power has been pushed to a record high by miners.
The exchanges are also working hard to attract gamblers and introduce new gameplay in preparation for the upcoming bull market. Recently, some exchanges have begun to learn the game of A shares and launched ETF products. This is not enough. It is also necessary to increase leverage and engage in a messy 3x leverage ETF.
Gamblers have long since stopped buying, and the A shares that have always been despised by the currency circle have become fragrant.
In fact, since the end of the bull market in 2017, the currency circle has entered the era of stock killing, whether it is the mining of FCoin transactions, or the subsequent IEO wave, perpetual contracts, leveraged ETFs, platform currency destruction, and some recent The mutual tearing of the two head exchanges reflects the reality of the depletion of the currency circle.
Therefore, we can see that no matter the external factors such as the Fed ’s interest rate cuts or the internal factors such as mining machine manufacturers, miners, and exchanges, are unable to push Bitcoin to a new high in the short term.
You know, in the face of some Bitcoin believers, this halving is the last epic bull market of Bitcoin . You should buy it.
Who knows, just like a bull market is born in despair, grows in suspicion, and ends in madness, when more and more people doubt Bitcoin, the bull market may come.
Just before the press release, Li Xiaolai , a former "bitcoin's richest man," claimed in a live broadcast that Bitcoin was a scam and that he was gone (perhaps a joke). And another well-known investor in the currency circle also told the author that he has withdrawn.
It's really dreamy, thinking about the last bull market, "one day in the currency circle, one year in the world". Looking back, like a song: I knew it was like a dream.