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On January 13, it was reported that the Guangdong Financial Regulatory Bureau recently launched a crackdown on unapproved "financial holding" companies. On January 12, the Guangdong Financial Regulatory Bureau published a list of 61 business entities within its jurisdiction (excluding Shenzhen) that were using terms such as "financial holding" or "financial group" without approval, or whose names contained the word "financial holding," requiring them to apply for deregistration or change their names and business scope within three months.On January 13th, Jeff Schulze, Head of Economics and Market Strategy at ClearBridge Investments, stated that while investors may cheer the CPI report as further evidence of cooling inflation, the Federal Reserve will likely remain on the sidelines due to the short time lag between the data and the government shutdown, and the inherent uncertainty. This report is positive for risk assets and increases the likelihood of the Fed providing additional monetary policy support in 2026.January 13th - Nick Timiraos, the Feds mouthpiece, stated that the December Consumer Price Index (CPI) is unlikely to change the Feds current wait-and-see attitude, as officials are likely to want to see more evidence that inflation is stabilizing and gradually declining before cutting interest rates. The Fed has lowered its benchmark interest rate in the last three meetings, most recently in December, even though inflation stopped declining last year. Officials lowered rates due to concerns about a potentially larger-than-expected slowdown in the labor market. For Fed officials to resume rate cuts, they may need to see new evidence that labor market conditions are deteriorating or that price pressures are easing. The latter may require at least several more months of inflation data to become apparent.January 13th - Morgan Stanley Wealth Management Chief Economic Strategist Alan Zentner commented on US inflation: "Weve seen this before—inflation hasnt picked up again, but it remains above target. Cost pass-through from tariffs remains limited, but housing affordability hasnt improved. Todays inflation report is insufficient to provide the necessary justification for the Federal Reserve to cut interest rates later this month."On January 13th, Valentin Malinoff, Head of G10 FX Research and Strategy at Crédit Agricole, believes that given the markets muted reaction to the CPI data, traders should buy the dollar when it falls from current levels. The muted market reaction further confirms that many negative factors related to the Federal Reserve have already been priced into the dollar, as expectations of two rate cuts in 2026 have already been priced in. It is also worth noting that even with the recent decline in the dollar due to heightened concerns about fiscal dominance, the market has not anticipated the timing of Fed rate cuts. Therefore, the dollars real interest rate advantage relative to the euro and pound is not fully reflected and is undervalued.

Investors May Turn From Crypto on Fed Interest Hike Hopes

Cory Russell

Apr 20, 2022 09:51


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  • This year, the Fed may raise its rate objective to as high as 3.5 percent.

  • According to economists, being overly proactive might lead to a lengthier slump.

  • This month, crypto markets have lost more than 12% of their value.


Cryptocurrencies may have an issue with interest rates; as soon as they start to rise, trade volumes drop and markets plummet.


As the Federal Reserve of the United States increases interest rates, as it did last month, investors may be drawn to riskier assets. The Federal Reserve hiked interest rates from 0.25 percent to 0.5 percent in March, which is still a small increase but the first in almost three years.


President of the Federal Reserve Bank, James Bullard, has said that the central bank must work quickly in order to attain a rate of roughly 3.5 percent this year. According to April 18 estimates, this may be accomplished with successive half-point increments and even 75-point rises. At the Fed's meeting in early May, Fed Chair Jerome Powell stated a 50-basis-point hike may be considered.

Defending Against Inflation

Central banks throughout the globe are stepping up their anti-inflation efforts, but many are expecting a lengthy and drawn-out war. Inflation in the United States is at a four-decade high of 8.5 percent, driving investors into safe-haven commodities like gold and Bitcoin (BTC).


Investor appetite for crypto assets looks to be decreasing as the interest rate recovery continues. Higher borrowing rates may also have an effect on people who are using leverage to invest in bitcoin.


On the other side, economist Mohamed El-Erian told CNBC on Monday that if the Fed raises its interest rate objective, gold and Bitcoin prices would rise.


He went on to say that the Fed may be afraid that failing to meet its objective "may force this economy into a longer-term recession, not just a short-term recession."


When fiat currencies are weak, bitcoin and crypto assets are in high demand; however, this has not been the case lately.

Cryptocurrency Markets Are In Decline

Since the beginning of the month, the market capitalization of cryptocurrencies has dropped 12.3 percent. As a consequence, the space industry has lost roughly $300 billion.


The overall market capitalization is now just under $2 trillion, down 34% from its all-time high of just over $3 trillion in November.


Markets have gained a tiny 2% in the last 24 hours, but the overall trend in digital assets remains gloomy, and this trend might continue for the remainder of the year.

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