The US Federal Reserve is beginning the process of lowering its $ 9 trillion balance sheet, which has increased in recent years in a measure called Quantitative Tightening (QT).
Analysts from cryptocurrencies and financial investment firms have differing views on whether QT, which begins on June 1, will put an end to a decade of unprecedented growth in cryptocurrencies.
The worst thing about this is that I would imagine that ~ 80% of Americans have no idea what AMAZING is
Why should we, this was not taught in mainstream school
The SEC should be concerned about educating Americans on these terms as I believe it is part of “PROTECTING” us https://t.co/Z8RwUNPJwF
– WendyO.eth ✨ (@CryptoWendyO) 31 May 2022
Players may view QT as the opposite of quantitative easing (QE) or money printing that the central bank has been involved in since the onset of the Covid-19 pandemic in 2020. Under QE conditions, more money is created and distributed while the Fed adds bonds and other government documents in its balance sheet.
The Central Bank plans to close its balance sheet by 47.5 billion dollars a month for the next three months. In September this year, it aims for a 95 billion dollar decrease. It aims to reduce its balance sheet by 7.6 trillion US dollars by the end of 2023.
Bitcoin has never in its history been in the bull market while the Central Bank tightened its grip.
Clever whales have spent the last 12+ months throwing their bags at dumb retailers.
May the collapse be inevitable!
– CryptoWhale (@CryptoWhale) May 4, 2022
Tom Matthews, communications manager at Australian crypto exchange Swyftx, believes QT could have a negative impact on the market. He told the Cointelegraph on Wednesday that “it is very possible that you could just see the growth of market value slow down a bit.”
“The Fed is destroying assets harder and faster than many analysts had expected, and it’s hard to imagine that this will not have any effect on investor sentiment between markets.
Launched in March 2020, the impact of QE on the cryptocurrency market has been spectacular. CoinGecko data show that the market value of cryptocurrencies declined through 2019 and early 2020, but a vibrant bull market began in late March 2020 when the money printer caught fire. The total market value of cryptocurrency jumped from 162 billion dollars on March 23, 2020, to over 3 trillion dollars last November.
At the same time, the central bank’s balance sheet increased 2.1 times from USD 4.17 trillion on 1 January 2020 to USD 8.95 trillion on 1 June 2022. This is the fastest increase since the last global financial crisis that began in 2007.
Connected: The head of the United Nations sees a “great opportunity” in cryptography: WEF 2022
Nigel Green, CEO of financial advisory firm deVere Group, believes that the market’s response to QT will be minimal because “it is already priced”. Green said it could be a “shock response from the markets” due to the unexpected speed with which QT is rolling out, but he sees it as little more than a shake-up.
“Furthermore, we expect the market to jump imminently, which means that investors should locate portfolios to take advantage of this.
Wage increases among US workers, especially in the hospitality sector, have already been observed as labor demand is still high. Assuming wages remain high through QT, the United States could emerge from the economic collapse with less income inequality. Crypto Marketing Economist explained on May 31st quack that if people end up with more money in their pockets from their higher wages, the “cryptocurrency market could ultimately benefit” on QT.
It is interesting to note that the highest wage growth is in the accommodation and retail sector.
This could mean that the United States emerges from this recession with ↓ income inequality.
And if more people have disposable income, the cryptocurrency market could eventually benefit. image.twitter.com/J3DQ2DwnDZ
– Economist (@economiserly) May 30, 2022
Matthews at Swyftx added that although markets have experienced increasing volatility recently, Bitcoin (BTC) could benefit as it now shows its position as a bell asset. He noted that Bitcoin dominance is now around 47%, up eight percentage points from the beginning of 2022. He said: “There are different ways of interpreting this,” he added:
“It indicates that market participants are trying to add value to Bitcoin, which means we could see weaknesses continue to develop between currency markets if current market conditions continue to play out.”
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