The Fed will announce its decision on interest rates on Wednesday. In December 2023, many analysts assumed that the central bank authorities would start cutting on that day. Will this happen?
Problem with reprinting
The cryptocurrency market is, in a way, the work of money corruption by central banks. Bitcoin differs from e.g. the dollar or the Polish zloty in that it cannot be artificially printed. There is not a group of officials behind it who decide that at a given moment they need to go “brrr” and create new money.
Let me explain an important matter at this point. There is nothing wrong with reprinting itself. Yes, I know what many readers will think now. “The editor has gone to the dark side.” Let me explain what I mean.
The creation of new money is necessary for the development of the economy. For example, medieval rulers waged wars, among others: in order to obtain ores – gold and silver – from which coins were minted. These were necessary for the development of the exchange market. However, the problem arises when this “reprinting” results not from market needs, but from political reasons. The ruling party wants to “buy” the votes of its voters and announces the launch of social programs. Then a very dangerous phenomenon may occur. When the scale of printing is greater than the market's efficiency (the market is unable to “swallow” too much currency in circulation), inflation occurs. In other words, we have too much money and too few goods and services.
Understand me well: social policy can be right, but only if it is accompanied by greater efficiency. Companies are able to produce more goods and offer more services. Then there is a chance that both these forces will balance each other and there will be no inflation.
Will the Fed start cutting rates?
On Wednesday, June 12, the Fed authorities are to announce whether they are returning to the policy of cuts or not yet. The central bank's December report showed that we will face as many as three cuts this year – each of 25 basis points. Analysts assumed that the first reduction would take place in June, which is now.
The reduction in rates, which are now in the range of 5.25 to 5.5%, will result in big increases in the markets. Here the reason is obvious. Investors will start fleeing to the trading floor when they see that the Fed wants to “spoil” the dollar again, i.e. offer it at a lower price (i.e. grant loans at a lower interest rate). In such circumstances, it is better to have gold, silver, stocks or bitcoins rather than dollars.
Currently, bitcoin is basically at a standstill. Investors are waiting for Wednesday. Everything seems to indicate that nothing big will happen even then. Unemployment in the US has risen a bit recently, but not enough for the Fed to conclude that the market has cooled down. Inflation, in turn, is not falling, so Jerome Powell and his people will wait with cuts until better times come.
Today, one bitcoin costs approximately USD 69,379, which translates into zero decrease/increase on a daily and weekly basis.
