On February 25, the U.S. 10-year Treasury bond interest rate suddenly spiked to 1.6%, causing the Nasdaq market and the crypto market to plummet at the same time. The Muso blockchain believes that this also affects the market’s confidence in the future trend of Bitcoin prices.
Recently, Junhaeng Lee, the founder of Streami, a South Korean blockchain financial company, commented about this matter. Based on the changes in the U.S. Treasury bond interest rates and the Federal Reserve’s response policies, three different scenarios and results were deduced, and the prospects of the crypto market were analyzed.
With the simultaneous decline in the Nasdaq market and the price of Bitcoin, and the rise in interest rates on the U.S. 10-year bonds, many people are worried about the future of Bitcoin’s price. The reason for fear is that because market interest rates have risen, and the price of Bitcoin has plummeted by more than 20%. The market sentiment may shift to a risk aversion model in the future.
We believe that on-chain and macroeconomic indicators are the core drivers of bitcoin prices. Contrary to the fears of many people, although the price of Bitcoin will experience short-term ups and downs, there is still huge room for its appreciation.
In the second half of last year, it is predicted that there will be two important variables in the 2021 macroeconomics. First, after the economic recovery from epidemic, will inflation expectations lead to an increase in market the interest rates? Second, when market interest rates rise, how will the Fed set policies to respond? If these two variables are used for deduction, there will be a total of three possible scenarios. This article will begin with the least likely scenario. The market interest rates will rise as the inflation rate rises. However, if the inflation rate is expected to be 3% this year, then long-term bonds will lose money. Therefore, many long-term bonds will circulate in the market, and the price of long-term bonds will fall, while relative interest rates will rise. The anticipated inflation uses this mechanism to raise the market interest rates. However, if the interest rate of long-term bonds rises, the interest rate of short-term bonds will also rise. Long-term bonds and short-term bonds are issued by the same central bank, and they have the same credit rating, so price recognition will likely occur. Interest rate is a determinant of the benchmark interest rate. Usually, the central bank adjusts the price of short-term government bonds (i.e. interest rates) by buying or selling the short-term government bonds, thereby setting the benchmark interest rate (except for extreme cases such as quantitative easing). In this case, if the Fed does not take any response to the rise in long-term bond interest rates, then the benchmark interest rate will also circulate through the following loop. Bitcoin is too large. It is suitable for big players and large institutions, but there are not many funds available for small and medium-sized retail investors, so what should they do? Here, we recommend a project that is very suitable for small and medium-sized retail investors. It is the NGK computing power project. With the official launch of SPC and VAST, the SPC is purely using NGK computing power for mining, and its sub-coin VAST requires SPC for issuance. After that, both will meet us at the NGK ecological exchange. In the future, NGK will also launch more activities to support their appreciation. It is the best time to join now, so hurry up!
