Edited by: Bi LumingWithin an hour, Bitcoin staged a trend of long short to recover and cut. At around 8:00 am Beijing time on the 10th, Bitcoin fell below the $30000 mark, breaking a new 10 month low and falling more than $10000 from the highest point since the Federal Reserve raised interest rates on May 5th
Edited by: Bi Luming
Within an hour, Bitcoin staged a trend of long short to recover and cut. At around 8:00 am Beijing time on the 10th, Bitcoin fell below the $30000 mark, breaking a new 10 month low and falling more than $10000 from the highest point since the Federal Reserve raised interest rates on May 5th.However, as of 9:00 pm, Bitcoin has hit $31000 per piece upwards, up 3.06% on the day, while Ethereum has hit $2300 per piece upwards, up 3.27% on the day.
Image source: Sina Finance
Since April 2022, the cryptocurrency market has ushered in a new round of cold waves, with popular currencies such as Bitcoin, Ethereum, and Dogcoin all falling, sparking market discussions.On May 9th, Bitcoin fell below the $34000 mark, reaching a nearly three-month low. Since the Federal Reserve announced a rate hike on May 5th alone, Bitcoin has experienced a cumulative decline of over 15%.
Bitcoin plummeted by over 10% at one point
According to the Securities Times, in response to inflation, the Federal Reserve announced on May 4th its decision to raise the federal funds rate to the 0.75% -1.00% range, marking the first significant interest rate hike of 50 basis points since 2000; Starting from June, the scale will be reduced at a monthly rate of $47.5 billion, and gradually increasing the scale reduction limit to $95 billion per month within three months. After Federal Reserve Chairman Powell stated that he would not consider raising interest rates by 75 basis points for the time being, US stocks recorded a sharp rise on the same day. However, investors began to worry that the Federal Reserve may find it difficult to control inflation while avoiding an economic recession, and the decline in US stocks has continued to this day.
Kristina Hooper, Chief Global Market Strategist at Invesco, believes that the market is digesting the Federal Reserve's monetary policy, which is beginning to return to normalcy. Aggressive rate hikes will raise the prospect of a recession, especially considering high inflation, the situation in Ukraine, and supply chain disruptions related to the epidemic.
On the 9th, a survey released by the Federal Reserve Bank of New York showed that American consumers' inflation expectations for the next year declined in April, but their views on medium-term inflation and household spending expectations climbed to new highs. A survey shows that the median expectation of US consumers for the next year's inflation level decreased by 0.3 percentage points to 6.3% in April, while the three-year inflation expectation increased by 0.2 percentage points to 3.9%.
Raphael Bostic, Chairman of the Federal Reserve of Atlanta, stated that the Federal Reserve could raise interest rates by 50 basis points each in the next two to three meetings, and then evaluate the response of the economy and inflation to decide whether further rate hikes are needed. Bostek believes that the 50 basis point interest rate hike approved by the Federal Reserve last week "is already a quite radical measure" and there is no need for more radical measures. Analysis suggests that this also seems to rule out a larger 75 basis point interest rate hike.
I think we can maintain this pace and pace and truly see how the market is developing... We will raise interest rates a few times, maybe two times, maybe three times, to see how the economy reacts, see if inflation continues to approach our 2% target, and then pause for a moment to see how the situation is
On the same day, Bitcoin also showed weakness, plummeting by over 10% to below $31000 during the session. US Treasury Secretary Janet Yellen is scheduled to deliver a speech to the Senate Banking Committee on the 10th. In her prepared speech, she talked about digital assets, new products, and technologies that bring new opportunities in enhancing innovation and efficiency, but may exacerbate financial risks. The Financial Stability Supervision Committee (FSOC) is trying to confirm the risks that digital assets will pose.
Image source: Photographic network-501024898
Regarding the financial market situation, Yellen stated that he will not be surprised by the continued volatility of the market in the summer. Although the valuations of some assets are still at high levels compared to history, the US financial system is still operating in a relatively orderly and stable manner.
Federal Reserve Reports Issue Latest Warning
According to the Chinese website of the Wall Street Journal cited by China News Agency on May 10th, the Federal Reserve stated on Monday that high inflation rates, combined with a sharp rise in interest rates, are one of the biggest recent risks facing the US economic system.
The Federal Reserve stated in its latest semi-annual Financial Stability Report that further negative surprises in inflation and interest rates, especially if accompanied by a decline in economic activity, may have a negative impact on the financial system.
The Federal Reserve report emphasizes that recent risks reflect a survey of New York Fed staff, including scholars, community groups, and domestic and foreign decision-makers.
Image source: Xinhua News Agency
The report mentions that the simultaneous increase in inflation and interest rates may weaken the balance sheets of households and businesses, leading to an increase in defaults, bankruptcies, and other forms of financial crises. Families may be affected by unemployment, higher interest payments, and a decrease in housing prices caused by rising mortgage rates and declining housing demand.
The report also points out that the quality of corporate credit may be eroded by a significant increase in interest rates, which will increase the borrowing costs of enterprises and potentially have a negative impact on employment and corporate investment.
This report aims to identify the risks faced by the financial system, and the situation warned by the Federal Reserve may not necessarily be its prediction of the direction of the economy.
The report states that the vulnerability of corporate and household debt is moderate. The report points out that since the last stability report at the end of 2021, the financial situation of many families has continued to improve, partly because of the strong job market, high personal savings, the remaining COVID-19 relief plan and rising house prices.
Daily Economic News Comprehensive Zhongxin Jingwei, Securities Times
Daily Economic News
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