A Comment -- General Comments From an Expert (A Commentary)

ANALYSIS ON INTEREST RATES

During the last 2 years, central banks have created massive money (quantitative easing) in order to make recovery plans and avoid the impacts of the economic crisis caused by the Covid.

This injected money ended up massively in the stock markets (stocks, futures, cryptos), which contributed to give a huge boost to the different assets and to pull them higher and higher. Nevertheless, logically, this huge money creation of several trillion dollars contributed to increase inflation.
To regulate this, central banks can generally play on 2 levers:

• Stop quantitative easing.

• Raise interest rates (today between 0% - 0.25%).

The FED has chosen to raise its key rates for the first time since 2018 (which should start in March 2022), concretely, this means that borrowing money costs more and at the same time, the currency (here the US dollar) that we hold yields more interest. If the currency earns more interest, it automatically appreciates and its value on the currency market increases (you would rather keep 1 million dollars with 1% interest on it than the equivalent in euros with 0%, so you sell your euro to buy dollars).

The equity market is becoming very risky, because with the end of quantitative easing, the liquidity tap will close. As far as the market we are interested in, the crypto-currency market, is concerned, it becomes extremely interesting, because if it is true that it is an extremely volatile market and that it has also benefited greatly from quantitative easing, it is also true that many investors consider certain assets, notably Bitcoin, as a safe haven in the same way as gold and consider using it to fight this inflation. In addition, with some DeFi protocols, it is possible to earn interest passively by staking or farming on blockchain (on stablecoin in particular).

The year 2022 will be very revealing for the blockchain ecosystem, as with the exponential adoption of blockchain projects by many large investors, let's hope that crypto currencies start to de-correlate from other markets, and from each other, in order to fulfill their full potential!

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Investors are worried about multiple risks: geopolitical, inflation, interest rates and labour. Much of the selling is based on this fear. The market decline has created more fear. However, every trade has a buyer. Economic connections are still good, and the sell off will end at some point. Unlock Premium - Try 5i Free

Gold. Has been a frustrating trade. Got bullish in the $1,000-$1,100 area. Thinks it should be trading at the $2,400-$2,500. It's probably due to crypto currencies as an inflationary hedge. This experiment could end poorly for crypto investors, but it is to be seen still. Environment is bullish.