PANews reported on December 13 that Matrixport released a new report, saying that there are many different ways to succeed in cryptocurrency investment, one of which is to correctly predict the macroeconomic situation and position yourself before major changes. The report expects inflation to continue to decline over the next two years and could fall back to around 2%. Last night, the market received the last Consumer Price Index (CPI) report of the year, with inflation coming in at 3.1%, and the report expects to continue to see readings below 3% next year. The report mentions that the market has been advocating a rate cut for months, while the Fed has been holding its nerve since July 2023. The situation is similar to January 2019, when the Fed raised interest rates in a row in 2018 but then paused for seven months. During the "pause", the BTC rose by almost 300%.
The inflation rate is 3.1%, the US interest rate (federal funds rate) is 5.25%, and the Fed's monetary policy is inconsistent. The report says its view is not to say that this inconsistency will hurt the economy, as it will limit capital spending and ultimately stifle the economy and lead to a recession. The report argues that the longer the Fed maintains a "tight" monetary policy, the more savers will be paid, and that money will eventually flow into risky assets. The economy has shifted from an asset-heavy economy (real estate, industrial buildings, etc.) to an asset-light economy (remote work, business done via Zoom and other tech apps, etc.). In addition, the most important sector in the (US) economy is technology, which has a 28% market share in the US stock market. As a group, these companies have almost zero debt and, like many investors, hold large amounts of cash that they don't need.
Considering that the assets of U.S. money market funds have doubled since COVID, from $3 trillion to $6.1 trillion, there are still $320 billion in annual interest payments, the report analysis said. That's the equivalent of $370 billion a year in interest payments — or $1 billion a day. Funds that have easy access to risk assets (stocks and cryptocurrencies) and principal ($6.1 billion in money market funds) can also be used to raise asset prices. The majority of the interest expense is borne by the U.S. government, as they, as the largest borrower, are required to pay the interest rate on the debt. While the government's debt burden is getting heavier, the private sector appears to be benefiting, with $1 billion a day of idle cash that can drive up asset prices.