US Federal Reserve shrinks bitcoin

Publish: 2021-03-22 06:31:35

bitcoin is expected to rise again when the Federal Reserve cuts interest rates again. This is an opportunity for them. Bitcoin will benefit greatly in the short term if the Federal Reserve continues to cut interest rates

however, the U.S. economic system should not be so weak, perhaps these are just a surface , because for the mainstream financial markets, the U.S. dollar, stock market, gold, futures, foreign exchange, bond market, funds and other markets are the focus of big funds. Because the currency circle is still a relatively isolated small market after all, it has no linkage with the traditional economy

2. Bitcoin is not issued by the Federal Reserve, which has no right to ban it. He can only ask the institutions of the Federal Reserve not to accept bitcoin. Zhou Xiaochuan, the governor of the people's Bank of China, once said that bitcoin is a tradable asset, just like stamps. Bitcoin is issued by the central bank, not to speak of banning it. China's central bank defines bitcoin as a special Internet commodity, which denies its monetary attribute, but people can buy and sell it freely at their own risk. Bitcoin home has the full text and explanation of the bitcoin risk notice jointly issued by the central bank and other five ministries in 2013. Most of the major countries in the world also adopt a cautious attitude towards bitcoin.

The Fed has cut interest rates twice in a row, and the previous decline of the bitcoin may be reversed. They have a chance to start a new round of rise . Although the Fed has plans to cut interest rates, it is also an opportunity for the bitcoin

now many people expect the Federal Reserve to start the next round of easing policy, because the US dollar has not been released for many years , so many financial assets are very looking forward to it, just like bitcoin. Some people say that bitcoin will soon return to the time of US $20000. So the trend of bitcoin is closely related to the trend of the US dollar

4. When the Fed shrinks its balance sheet, it means to rece the scale of the balance sheet. That is, the Fed sells its own treasury bonds, MBS and other assets and takes back the money (base currency) printed ring the period from November 25, 2008 to June 19, 2013. As a result, the US dollar in the market decreases and the market is short of funds
under normal circumstances, the Fed's scale rection will not only rece the US dollar in the market, but also make the US dollar more and more expensive at a fixed price level, so the impact of scale rection is greater
generally, one year after the scale rection, some countries show a sharp rise in prices, some show a sharp decline in economy after one or two years, and some show a sharp increase in capital outflow after three years.

For gold investors, they all know such a law: if the US Federal Reserve raises interest rates and the US dollar rises, gold will fall. If the US Federal Reserve does not raise interest rates, the US dollar will go gold or support a rise

Impact:

scale rection has a greater impact on Liquidity: "like interest rate increase, scale rection is the only way for the normalization process of monetary policy of the Federal Reserve. The reason for choosing this opportunity is that the recent US inflation continues to be low and the process of interest rate increase may slow down. We need to scale down to maintain the normalization direction of monetary policy, On the other hand, the abnormally large balance sheet of the Federal Reserve is pushing up asset bubbles and jeopardizes the stability of the financial system. Wang Qing, deputy general manager of research and Development Department of Dongfang Jincheng, a rating agency, said
bring appreciation pressure on the US dollar: some analysts believe that "table shrinking" will tighten US dollar liquidity, bring appreciation pressure on the US dollar, and emerging markets will face challenges such as devaluation of local currency and capital outflow. After the Federal Reserve released the news, the dollar index jumped from around 91.66 to around 92.6. The US dollar is stronger, the non US currencies are weaker, and the RMB is no exception
the scale rection will not cause obvious external pressure on RMB

means that the central bank reces the size of the balance sheet. The Federal Reserve can realize the direct recovery of the base currency by directly selling its bonds or stopping the reinvestment of maturing bonds, which is a more stringent tightening policy than raising interest rates

On September 20, it was reported that the US Federal Reserve announced that it would start to rece the balance sheet with a total amount of US $4.5 trillion from October this year to graally tighten monetary policy

In comparison, active table shrinking is more powerful than passive table shrinking. Considering that although the US economy has recovered, its foundation is not solid, and if it is forced too hard, it is easy to make the US economy, US stocks, US debt and US dollar into turmoil, so the policy of passive table shrinking is the main policy in the future, while active table shrinking is the auxiliary policy

since the beginning of this year, the Federal Reserve has continued to communicate with the market on interest rate increase and "scale rection", which has enabled the market to digest the impact of changes in US monetary policy in advance. Before and after the Federal Reserve announced its decision on the same day, the New York stock market fluctuated little

8. No. In this way, the Fed's issuance of additional currency is to increase liabilities, and the purchase of treasury bonds will form assets

to rece assets and liabilities is to sell treasury bonds or stop reinvestment of maturing bonds and recover liquidity (that is, return of funds)
as a result, interest rates will rise

9. I don't know if you are interested in the exam. If you are, I will talk about it briefly. 1. The expansion and contraction of the balance sheet by the central bank is essentially the concept of the United States. Because the US Federal Reserve is a private bank, that is, the central bank's monetary policy has great independence, it is impossible to require the US Federal Reserve to issue money indiscriminately. Therefore, if the US Federal Reserve wants to issue money, the US will issue treasury bonds. The US Federal Reserve will purchase the Treasury bonds and invest the money into the real economy to stimulate the development of the real economy. Therefore, from the perspective of the balance sheet of the central bank, the amount of money issued by the asset side has increased, and the amount of treasury bonds held by the liability side has also increased. This is the so-called expansion of the balance sheet, and the popular explanation is quantitative easing. 2. The Federal Reserve has no ability to directly regulate bank lending, it can only regulate interbank lending rate to affect lending. The result of quantitative easing is to control the quantity of high-energy money, which has no impact on the money multiplier. The adjustment of deposit rate by the Federal Reserve can affect the money multiplier. 3. As for the impact of quantitative easing, it is mainly explained from the perspective of Keynesian economics. Generally speaking, it is to restrain the impulse of citizens to hold money, so as to promote the economic recovery. 4. The general unstable exchange rate of the Federal Reserve, the United States is a floating exchange rate system, the exchange rate is free to float. 5. I would like to say a little more here, because the essence of quantitative easing is that the Federal Reserve has purchased US Treasury bonds, that is to say, issued a large number of treasury bonds, which will lead to the so-called debt problem. Quantitative easing comes down in one continuous line with the US debt problem. 6. In contrast, China's central bank is not independent, so it will indiscriminately issue money at the request of the central bank. After the world economic crisis, China's M2 has soared from 40 trillion to 100 trillion, which is the highest in the world. Of course, we should exclude the amplification effect of money multiplier and capital bank idling, China's finance has come to the brink of collapse, and the consequences will be unimaginable.

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US Federal Reserve shrinks bitcoin

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