Neel Kashkari, chairman of the Minnie Police Federal Reserve Bank, solved the problem of increasing the return on the financial department on April 11, which suggested that the US government debt could show an investor sentiment. Kashkari emphasized that there is a tool that can provide more liquidity if the Federal Reserve Bank is needed.
Kashkari’s remarks emphasize the importance of maintaining a powerful dedication to reduction in inflation, indicating possible turning points to BTC (Bitcoin) investors as economic uncertainty increases.
10 -year return for the US Treasury. Source: TradingView / COINTELEGRAPH
Currently, the US government bond yield for 10 years is not 4.5%. Even if it reached the last 5%in October 2023, it does not necessarily mean that investors have lost their trust in the ability to meet the financial obligations of the Treasury. For example, gold prices have exceeded $ 2,000 after the yield has already decreased to 4.5%at the end of November 2023.
Is the Fed injected with liquidity and positive for Bitcoin?
Financial rise often indicates concerns about inflation or economic uncertainty. This is important for Bitcoin Traders because the higher the yield tends to make a fixed income investment more attractive. However, if these returns increase, if the trust in the government’s fiscal policy is weakened and recognized as a sign of deeper systematic problems, the reviewers can switch to alternative alternative fences such as Bitcoin.
Bitcoin/USD (left) vs. M2 global currency supply. Source: Bitcoincounterflow
The trajectory of Bitcoin depends on how the Federal Reserve’s Board of Directors respond. Liquidity injection strategies generally increase the price of bitcoin and increase the high yield, which increases the cost of borrowing of business and consumers, which can potentially slow economic growth and negatively affect the price of bitcoin in the short term.
One strategy that can be used by the Federal Reserve is to buy long -term treasures to reduce yields. In order to offset the liquidity added through the purchase of bonds, the Fed can simultaneously carry out a station repository that has cash from the bank overnight at the same time.
The US dollar is weak and bank risks can pump Bitcoin prices.
This approach can temporarily stabilize yields, but aggressive bonds can inform the despair of control. Such signals can raise concerns about the Fed’s inflation management ability. These concerns often weaken their trust in the dollar’s purchasing power, and investors can push investors to Bitcoin as hedge.
Another potential strategy is to provide low profit loans through the discount window to reduce the need to sell long -term bonds by giving the bank an immediate liquidity. To cope with this liquidity injection, the Fed can impose strict collateral requirements, such as evaluating bonds pledged at 90%of the market price.
Systematic danger of the US financial service industry. source: Cleveland supply
This alternative approach remains related to mortgage loans while limiting banks from banks. But if the mortgage requirements are too limited, banks may have difficulty in getting enough liquidity even if they access discounted Windows loans.
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It is too early to predict what kind of path the Fed will suffer, considering the US dollar’s weaknesses with the recent return on the Ministry of Finance, but investors may not completely trust the Fed’s actions. Instead, they can switch to safe assets such as gold or bitcoin for protection.
Ultimately, rather than focusing on the US dollar index (DXY) or US 10 -year financial yields, traders should pay more attention to the systematic risks of the financial market and spread of corporate bonds. As these indicators increase, the trust in traditional financial systems weakens and set the steps for Bitcoin to recover the psychological $ 100,000 price level.
This article is for general information purposes and should not be considered legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.