Brothers, I seriously suspect that the White House is doing this on purpose! Announcing such a significant change in the Federal Reserve during Christmas week is like trying to make sure that our friends in the crypto circle aren't too comfortable during the holidays, deliberately coming to stir things up a bit? Just a few days ago, a fan told me, 'The market definitely won't fluctuate during Christmas week, I'm going to close my positions and go play for a few days,' and now they probably have to rush back overnight to keep an eye on the market. As someone who has experienced three changes in the Federal Reserve, I need to have a good talk with everyone: what survival codes of the crypto market are hidden behind this 'Christmas leadership change'?
Let's break down a core logic, a warning of valuable insights! Many people think that the change in leadership at the Federal Reserve only affects the US stock market and the dollar, and has nothing to do with the cryptocurrency market, which is completely wrong. One of the core driving forces of the cryptocurrency market is 'global liquidity,' and the monetary policy of the Federal Reserve directly determines the tightening or loosening of global liquidity. In simple terms, when the Federal Reserve prints money, there is more hot money in the market; this hot money will not only stay in the US stock market, but a portion will flow into the cryptocurrency market, pushing up the prices of BTC and ETH; conversely, when the Federal Reserve raises interest rates and reduces its balance sheet, hot money will flow back to dollar assets, putting pressure on the cryptocurrency market as funds escape. Therefore, choosing who becomes the chair of the Federal Reserve essentially determines the 'big direction' of the cryptocurrency market for the next 6-12 months.
Now, let's talk about the two popular candidates: they are simply 'two extremes': one is a dove representative, advocating for 'stabilizing growth before controlling inflation,' and has previously publicly stated that 'cryptocurrency assets are an emerging asset class and should be moderately regulated rather than implemented with a one-size-fits-all approach'; the other is a hawk representative, viewing inflation as the 'number one enemy,' repeatedly criticizing the Federal Reserve's easing policies, and has said that 'cryptocurrency assets are speculative bubbles that need strict restrictions.' The showdown between these two candidates directly determines whether the cryptocurrency market will be 'loosened' or 'tightened.' My personal judgment is: the probability of the dove being elected is higher, as the current recovery of the US economy is still unstable. Announcing a dove candidate during Christmas week can also provide the market with a 'reassurance pill' to avoid an asset sell-off during the holiday period.
Some friends may ask: If the hawk is elected, will the cryptocurrency market cool down? Actually, there is no need to panic excessively. First of all, the implementation of the policies by the chair of the Federal Reserve takes time; even if a hawk is elected, it is impossible to immediately raise interest rates and reduce the balance sheet; there will be at least a 3-6 month transition period. Secondly, after the development of the cryptocurrency market in recent years, it is no longer the 'little transparent' it used to be; the proportion of institutional funds is increasing, and its ability to withstand risks has also improved significantly. During the most aggressive rate hikes by the hawks in 2022, BTC did not drop below $15,000; the current market environment is much better than back then, and even if a hawk takes office, it is difficult to see a 'collapse-like' decline.
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