Gate Live Roundtable Discussion: In-depth Analysis of Federal Reserve Interest Rates and Macro Market Review by Macro Giants (2023.09.28)

Roundtable guests:
Phyrex (Data Porter)
Turkey Analyst (Macro Analyst, Major Event Researcher)
qinbafrank (Senior Analyst)
Watch the complete live stream playback： https://www.gate.io/live/video/644a513f2e90f02b8965d662ee8a7b6d

Topic 1: Interpretation of the Fed’s interest rate hike and Powell’s speech

Regarding the Fed’s forecasts for the economy and interest rates at the September meeting, macro analyst Qinbafrank proposed: First, the Fed raised the year-end interest rate for the first time in 24 years, from 4.6% to 5.1%, equivalent to reducing market expectations of interest rate cuts. Second, the Fed raised the economic growth rate for the first time in 23 years from 1% to 2%, indicating that the economy will grow steadily. Third, the Fed also lowered its core inflation expectations and unemployment rate, indicating that the Fed believes there is a greater probability of a soft landing. In the event of a downward economic trend, the economy can still maintain stability and the unemployment rate can remain low.

In addition, he also mentioned some short-term factors that affect the market, such as the strike of car workers, which may lead to price increases in new and used cars, thereby driving the trend of core CPI. If the strike continues until the middle and late October, the impact may be greater because this will have a base effect on core CPI.

Data analyst Phyrex suggested that the Fed may raise interest rates again in 2023, and interest rates may not change in 2024, depending on whether the Fed can expect core PCE to decrease to 3.3% in November and December. If inflation fails to reach 3.3% or even falls below this figure, the Fed may choose to raise interest rates once and maintain the interest rate unchanged.

Phyrex believes that investors should not rely too heavily on market judgments. Historically, the U.S. government shutdowns have not had a significant impact on the overall risk market and the government. However, if the shutdown lasts for more than one or two weeks, it may have some impact on the Fed’s access to inflation data for October, thereby reducing the possibility of a rate hike in November. Finally, the gradual reduction in excess savings indicates that the Fed’s rate hikes may have had some effect, with AI driving the rise of technology stocks and U.S. stocks beyond the Fed’s expectations.

Turkey analysts believe that the Federal Reserve has reached a turning point and needs to consider pausing rate hikes, leading the market to speculate on the possibility of a pause. He mentioned the latest data and dot plot trends, suggesting a lower probability of Fed rate hikes in the short term, and the potential timing for future rate cuts may be delayed by 3 to 6 months compared to previous expectations.

He pointed out that if the Fed does not raise interest rates in November this year, there is a high probability that it will continue to raise rates in the first quarter of 2024, which could lead to a three- to six-month delay in the market’s previous expectation of a bull market in the second quarter. He noted that the Bitcoin halving would lead to an increase in the scarcity of Bitcoin. However, since Bitcoin has begun to move towards centralization, the reduction in production of Bitcoin may not lead to a price increase as significantly as before. In addition, he mentioned some other noteworthy events, such as the approval of spot ETFs and discussions on AI regulation.

Topic 2: Outlook on the macro environment and the cryptocurrency market

Qinbafrank pointed out that in the future months, there may be a slowdown in the core CPI or a slight rebound in the cryptocurrency market. Excess savings in the United States are gradually being depleted, which means that consumers may reduce spending in the next few months or one to two years, leading to a slowdown in economic growth. In addition, fiscal spending is also increasing, which further weakens the potential for future economic growth.

Regarding the cryptocurrency market, Qinbafrank mentioned that we have experienced a significant volatility in the cryptocurrency market in the first half of the year, and there may be a rebound and bottom-searching process afterwards. For future investment strategies, he suggested to remain cautious in the short term and seek good investment opportunities, but should not be too pessimistic, as the probability of hitting new lows is not high. He believes that BlackRock may be more likely to be approved for ETFs because of their size and credibility.

Phyrex proposed that since January of last year, Bitcoin has been on the rise, with good support around $26,000 despite fluctuations. Even in unfavorable market conditions, Bitcoin has not fallen below this support level for a long time. He believes that unless there are situations such as SEC and CFT prosecution, Bitcoin basically has little chance of falling. Bitcoin price The rise and fall of prices are influenced by two main factors: macro sentiment and the stock of single chips. Currently, the entire market narrative is mainly affected by the Fed’s pause in interest rate hikes, BlackRock and Grayscale’s application for a spot ETF for BTC, and the impact of the pause key and halving cycle. In addition, the stock of single chips also has a significant impact on the overall price trend. If the price stock of a single stock exceeds 1.1 million coins, it may lead to a dangerous situation, while staying at seven to eight hundred thousand coins or not exceeding 1 million coins is relatively stable. The key factor in the entire market is whether the entire narrative will change and whether there will be a significant change in the stock of single prices.

Turkey analysts believe that in August-October of this year, the trading volume and activity of the entire macro picture and the crypto market itself were in a downward trend, which indicates low participation and liquidity in the market. Some large institutions and corporations have started to avoid risk, moving funds to other areas or selling, which may be one of the reasons for the poor market volatility and declining trading volumes. He believes that the market situation in August-December this year and in the first and second quarters of 2024 is not optimistic. He pays attention to the Fed’s policy moves, and believes that if the Fed pauses interest rate hikes, there may be a small wave of market movements in October, but the overall trend is still dominated by oscillations and declines.
He noted that macro policies to keep an eye on, such as the stablecoin bill and the application of spot ETFs, will have an impact on the crypto market. The development of AI technology will also have an impact on the cryptocurrency market, especially in a bad economic situation, investors will be more inclined to invest in cryptocurrencies such as gold and Bitcoin, which will have a positive impact on the market.

Topic Three: Develop Trading Strategies

Turkey analysts believe that in the short term, there may not be a new bull market in the cryptocurrency market, and even if there is a small market, it may face resistance at pressure points. He expects the market trend to gradually decline in the coming months and points out three possible pressure points. He believes that SEC regulation may lead to some large institutions hedging, affecting the inflow of funds and trading volume in the market. If the spot ETF is approved, he would be willing to increase investment or wait for a new round of deep correction in the market before gradually building positions.

Phyrex proposed that the overall market value of stablecoins is currently in a state of outflow, especially with the withdrawal of US investors. In the absence of obvious positive or negative data, the cryptocurrency market may remain volatile. He believes that although the Federal Reserve may cut interest rates, the impact on the risk market is not clear, and holding mainstream cryptocurrencies may be a safer choice. For investors interested in short-term price changes, he suggests paying attention to the maximum pain points of delivery options and the path change of stablecoin market value, and other indicators.

Qinbafrank believes that the market may rebound in October or in the short term. He mentioned that Bitcoin and the US stock market are not completely synchronized and sometimes move in opposite directions. The market may still seek a bottom in the mid-term, but the space for the bottom may not be large and may require more time. In the long term, he still has a positive view of the cryptocurrency market and tends to hold a large position in BTC and ETH. For other altcoins, he chooses to hold a small portion and engage in swing trading, otherwise it is easy to ride a roller coaster. He prefers to select some medium to long-term investment opportunities.

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