Fed Cuts Rates, Fueling Cryptocurrency Markets

1. The Fed cuts interest rates

In the September 14th article "European Central Bank cuts interest rates, the next three months may be the last chance for digital currency to enter the market", we believe that "now that Europe is one step ahead, it will inevitably bring more pressure to the Fed, so in At the upcoming Fed meeting this month, another rate cut by the Fed is almost a certainty."

Sure enough, on September 18, US time, the Federal Reserve announced that it would continue to cut interest rates by 25 basis points, bringing the interest rate down to 1.75%~2%. It is worth noting that 7 of the 17 Fed members believe that another rate cut will be necessary this year.

2. Cutting interest rates and releasing water is drinking poison to quench thirst

The fundamental reason why we firmly believe that the Fed will cut interest rates this time is that the current global political and economic environment is not optimistic. In addition, the US President keeps beating the Fed, believing that if the US does not cut interest rates, it will be at a disadvantage in this currency war. .

Neither the release of water by the European Central Bank nor the rate cut by the Federal Reserve is essentially the fundamental solution to the problem.

The fundamental way to solve the problem is to kill the zombie companies that should have died in accordance with the laws of the market economy; let the banks with bad loans that cannot be digested die; let the inflated stock market bubble burst.

But if this is really done, European and American countries will pay a huge price. This is a situation that no politician wants to see, so everyone unanimously adopted the method of drinking poison to quench their thirst. They only hope that there will be no problems in the short term, and they completely ignore long term consequences.

This kind of water release competition is like a nuclear arms race. Knowing that the consequences are unimaginable, but as long as one party starts, if the other party does not follow up, it will suffer, so it has to follow up.

As for whether the Fed will continue to cut interest rates this year, we only need to look at one point: whether the US stock market will continue to rise in the next three months.

If the rising trend can be maintained, interest rates may not be cut; if not, there is no need to wait for Wall Street interest groups to take action. The US president will desperately create chaos to force the Fed to cut interest rates and keep the stock market for his own re-election.

However, the U.S. stock market bubble has now expanded to such an extent that it is doubtful how much capital will continue to inflate this bubble.

Therefore, we still believe that the US stock market is not optimistic this year, when the Fed will be forced to continue to cut interest rates. In the long run, as the former chairman of the Federal Reserve Alan Greenspan recently said: the Fed will implement negative interest rates sooner or later.

3. The interest rate cut is injecting fuel into the digital currency market

The embarrassing situation of the Federal Reserve is a great benefit to the digital currency market in the long run. Every interest rate cut by the Federal Reserve is injecting fuel into the digital currency market.

Moreover, not only the Federal Reserve, but also every interest rate cut and water release by the European Central Bank and other central banks is injecting fuel into the digital currency market.

It is like a big car with a fuel tank full of oil. As soon as the engine is started, it will immediately set sail and run forward.

4. Talk about Ethereum again

A series of recent statistics about Ethereum are worthy of our attention:

One is the surge in USDT transactions. Over the past 30 days, a whopping $260,000 in Tether fees have been generated to process Ethereum transactions, according to data research firm Ethgasstation.info.

The number of USDT transactions on Ethereum now accounts for about 25% of the entire Ethereum network, which has led to a sharp increase in the transaction volume of the Ethereum network. The network utilization rate has soared to 90%, almost at full capacity.

The second is DeFi transactions on Ethereum. The vigorous development of the Ethereum DeFi ecosystem has led to a sharp increase in the use of smart contracts.

Boosted by these two factors, Ethereum’s Gas consumption hit a new high: According to data from Glassnode, the seven-day moving average of Ethereum’s daily Gas consumption reached approximately 48.193 billion Gwei on September 13, a record high since Ethereum At the same time, Ethereum began to experience congestion.

As of September 15, the daily transaction fee of Ethereum was $182,899, and the daily transaction fee of Bitcoin was $185,993. Since the current surge in Ethereum transaction fees is mainly driven by USDT, and this demand and drive will only become stronger and stronger, the transaction fees of Ethereum will only become higher and higher, and it will eventually surpass Bitcoin sooner or later.

It can be seen that the recent rise in the price of Ethereum is actually due to the soaring demand for applications, and this demand will be long-term and stable.

Therefore, I am firmly optimistic about the future performance of Ethereum.