Fed Holds Interest Rate Steady, Crypto Market May Pump Again After Adjustment

This month, the Fed's FOMC meeting decided to keep the Intrerest Rate unchanged, while raising future GDP expectations and lowering inflation expectations. Japan's first interest rate hike in 17 years has attracted global attention, but the upcoming rate-cutting cycle by the Fed may alleviate the market's concerns about liquidity. Meanwhile, European investors are also betting on rate cuts. The crypto market has experienced a brief adjustment, but based on supply-side analysis, the future pump momentum may still be strong.

On March 20, the Fed announced its interest rate decision, keeping the federal funds rate target range unchanged at 5.25% to 5.5%. Despite the CPI data for February being slightly higher than expected, the Fed chose to remain on hold. This marks the third consecutive time the Fed has kept rates unchanged, with the market generally believing that the rate hike cycle has ended. However, the Fed stated that there is currently no need for a rate cut. The Fed raised its GDP growth forecasts for 2024 to 2026 and lowered its unemployment rate forecast for 2024. The timing for a future rate cut may only be considered after signs of weakness appear in the labor market.

The performance of the U.S. manufacturing sector has always been one of the key focuses of the Fed. In March, manufacturing activity recorded the largest increase in nearly two years, with production, employment, and price indicators all accelerating. The initial value of the S&P Global U.S. manufacturing PMI in March slightly rose to 52.5, remaining in the expansion zone for the third consecutive month. These data reflect the good performance of the manufacturing sector in the current economic environment, but a comprehensive assessment still requires consideration of other economic indicators.

In summary, there is currently no need for a rate cut based on the main economic indicators in the United States. Although the Fed previously indicated plans to cut rates three times within the year, the market expects that there is a high probability that there will not be a rate cut in May.

Apart from the United States, Japan announced an interest rate rise for the first time in 17 years this month, raising concerns in the international market about liquidity contraction. For a long time, the yen has been favored by overseas speculators as an arbitrage tool due to negative interest rates. Now, the rise in the yen's interest rate could lead to higher borrowing costs, prompting speculators to sell other currencies to buy back yen. However, this effect may more reflect psychological panic, as international capital had already anticipated this. Furthermore, the Fed's upcoming rate cut cycle may alleviate some of the investors' concerns about liquidity.

This month, the three major US stock indexes reached new highs, but it also raised concerns in the market about the upcoming adjustment period. Artificial intelligence remains one of the core driving forces in the global stock market. Although some investors have begun to take profits, semiconductor-related stocks have not completely lost momentum, indicating that the AI investment boom is still ongoing.

In Europe, as the US stock market shows signs of stagnation, the Stoxx Europe 50 Index continues to rise. The European Central Bank has lowered its inflation expectations for the eurozone, anticipating that the eurozone may follow the US in starting an interest rate cut cycle.

The cryptocurrency market has experienced significant volatility this month. The price of Bitcoin first hit a historic high of over $73,000, then retraced to below $61,000, and subsequently rebounded to over $70,000. The U.S. Bitcoin spot ETF seems to have become a major factor influencing Bitcoin's trend. However, on-chain analysis shows that high-net-worth investors have not significantly reduced their holdings during this pullback, and retail investors are the main force behind the selling.

From the supply side, the rise in mining costs caused by Bitcoin halving is still one of the fundamental driving forces of the bull market. In the long term, Bitcoin prices may remain consistently high above mining costs, similar to gold.

This month, Ethereum has once again been classified as a security by the SEC, but BlackRock CEO Larry Fink stated that even if Ethereum is classified as a security, the launch of an Ethereum ETF is still possible. Currently, eight institutions have submitted applications for Ethereum spot ETFs to the SEC, which will make a final decision in May.

Despite numerous uncertainties in the short term within the crypto market, the supply-side impetus brought about by the halving cycle may support the continued rise of Bitcoin prices in the long run. Market participants should closely monitor the SEC's attitude and decisions while maintaining a cautiously optimistic investment stance.