Subnostr

1. Easing monetary conditions are generally positive towards risk assets, bitcoin particularly.

2. Monetary conditions were at a point where no further easing without significant repurcussions was possible when covid started, but the fed pulled a historical tightning of monetary policy in terms of significance and speed. << this was where we were

3. Yesterday, the FED clearly signaled that they were turning dovish (easing monetary policy), after 1+ years of being hawk (tight monetary policy)

4. So as we head into the halving (around late April 2024), which is generally a bullish event for BTCUSD, the FED COULD start loosening its monetary policy, which is basically adding fuel to the fire (i.e. BTC to the moon)

This is illustrated in the infographic where you can IMAGINE the purple lines heading down, which means price fo up for assets like bitcoin, AND that coinciding with the halving (which is the orange vertical line).

Nour 2y ago

Amazing explanation, thank you.

I am also interested in confirming my understanding that the 1yr bonds holders selling their shares by then (since they are no longer have high interest) would weaken the dollar even more, leading to more price increases. Likely a worse inflation that we saw in 2021...

Finally, is there anything to get from the difference in interest between USD and JPY here?

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Discussion

Libertariman 2y ago

interesting... I haven't thought much about it from that angle hollistically, so will have to think about it piecemeal at first, but the 1 yr bond holders have locked in the 5.25% for a year so they could ride that for a year under easing conditions which would be beneficial for them in the short run.

They could flock to longer duration bonds but that is going out of bonds and going back in so the net effect on USD shouldn't be that significant.

When looking at currency vs currency, they are valued relatively, and what you see is easing by central banks across the board (brazil recently for example). So in the short term I think there could be a weakening of the dollar but in the mid long term, I still think dollar will be the last man standing among fiat currencies. (I like MXN BTW)

USDJPY will be interesting.

The BOJ meeting is coming up on the 18, 19 so that is something to keep an eye one.

There were rumors that they would be exiting their negative interest rate policy but I don't they will be touching that, especially after yesterday's FOMC.

So yes if the BOJ doesn't move and the FED does loosen, USD weakening against JPY is the natural course of action in the short term.

But, -0.1% and 5.25% is a wide margin and while the US is positive real interest rates (if you believe CPI) JP is in negative territory so it is painful to long JPY and short USD. Therefore I still think long USD short JPY in the long term.