Why are the FED and cryptocurrencies connected?
Although it may seem that they are unrelated, the FED's monetary policy influences the entire global financial market, including the cryptocurrency market. The main reason is the concept of liquidity and risk aversion.
And they have the following effects:💥
1. High interest rates: When the FED raises rates, it seeks to curb inflation by making credit more expensive. This causes safer investments, such as Treasury bonds, to offer better returns. As a result, investors tend to move their capital from riskier assets (such as cryptocurrencies and technology stocks) to safer investments.
2. Interest rate cuts: The opposite occurs with a rate cut. The cost of money decreases, and the yields on traditional low-risk investments become less attractive. This drives investors to seek assets with greater profit potential, increasing risk appetite and favoring markets like cryptocurrencies.
But I would like us to consider the following effect that with all this FOMO and great expectations could present itself as follows:💥🗯
"Effect of 'buy the rumor, sell the news'": Often, the crypto market reacts with euphoria to rumors and expectations of an event (in this case, the rate cut). Prices may rise before the announcement. However, once the news is confirmed, there may be profit-taking and a temporary price drop, known as "selling the news". This underscores the high volatility inherent in the cryptocurrency market.
So we have seen in the last week a great Bull run that anticipates a movement in light of the effects derived from this great FOMO and the whales that through their "smart money" movements are preparing by entering into large accumulations of certain assets or tokens and these react to the trend that they propose....
Now, how long will it last? Will it be a great last moment to take profits and take advantage of a passive September that is less dynamic than its historical comparisons..
Get ready and stay informed, this Sunday has been normal for a break in the great bullish trend we experienced on Friday.
Dear community, the previous analysis is strictly for educational purposes and you must do your own research (DYOR) ..
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