Why crypto is not the fed's green eyed boy ?
Perhaps the answer lies in the fact that one use case of crypto is to fix what is broken with fiat.
Perhaps it is an over statement. Maybe a better interpretation could be that crypto can offer a better store of value and a far better way to transfer value.
Having said that I must add that not all crypto's are equal and neither were they designed to perform the above two functions.
Yet perhaps the idea behind crypto is to try to find a better way at performing these two things.
Perhaps the fed and the govt's see this as a way of challenging their role of having the ultimate authority to spew as much money as they want in the name of minting.
Current reaction to FED's rate cut response
Recently the FED announced that it would be hiking the interest rates by 0.75 percentage point.
Well this is huge specially in the light of the fact that this is the first time this has happened in the past 28 years.
Certainly this stands out as a Black swan event.
However this could mark a push towards an economic slow down.
This event was followed by a similar move by the Switzerland's central bank this time they have hiked its benchmark rate would rise from -0.75% to -0.25%
This is the first time in 15 years.
If you look at these events a small percentage point rise is sufficient to make headlines and make the economists worried.
When it comes to crypto and defi a 6-7% return on the very conservative side and a 20-30% return on a moderate scale does hardly raise an eyebrow.
Perhaps the crypto universe knows a thing or two about money that gives its investors better returns!
However what is the inverse correlation of the central bank news with BTC and other crypto.
A hike rate by FED would also reflect by a higher rate by banks.
Borrowing would get more expensive and term deposits and other such instruments would get more rewarding.
As a result there would be a shift in asset allocation from the risky to the safer.
Hence for some the high volatility of crypto makes it a high risk asset class.
Gold typically does better
In case an economic slow down happens due to the current developments then Liquid cash and Gold are seen as a preferred asset class to hold money.
What happens to BTC the digital gold
Bitcoin is referred to as digital gold as there is no need to physically hold it and it can be kept safe in a digital wallet.
It can be spent 24X7 and can be sent across borders as a means of exchange in no time with the minimum of fuss.
Yet the FED news caused a BTC price slump
This is actually quite strange as BTC remains true to its nature and a perfect store of value.
Perhaps it is the perception that has changed. However once the froth settles BTC and the stronger crypto should find the rightful place in the spectrum of asset classes as a true store of value and hope it would better valuations in the fiat world.
