Topic: Dollar asset allocation has become popular in cryptocurrencies as the Fed raises (Read 22 times)

Dollar asset allocation has become popular in cryptocurrencies as the Fed raises interest rates

Fed Chairman Jerome Powell is expected to consider another 50 or 75 basis point rate increase at the July 27 meeting. The Fed's rate hikes, the 10th in a cycle that began in March 2022, are aimed at easing inflation and draining excess liquidity from the market. The interest rate hike of the Federal Reserve attracts the global capital to flow back to the United States, which maximizes the stability of employment and price stability in the United States. As the global dollar returned to the United States, the decline of foreign exchange reserves in various countries accelerated, and the valuation of non-dollar stock markets declined; To counter the impact of higher interest rates, the European Central Bank also raised rates by 25 basis points in May. Global money tends to allocate to dollar assets as a way to cushion the blow to the economy.

Against the backdrop of dollar assets, the stock market has not done well, but the cryptocurrency market has done well. Hedging against economic crises by investing in dollar assets in crypto markets is a common practice among large funds. With the announcement in 2021 that the Houston Firefighters' pension fund, the Houston Firefighters Relief and Retirement Fund (HFRRF), had purchased Bitcoin for a defined benefit plan's portfolio, it was the first announcement of an investment in BTC by a U.S. public pension fund. Since then, a number of public funds around the world have shifted their dollar asset allocation directly to investing in the dollar-linked stablecoin USDT. Today, American pension funds announced the launch of US Pension Plan with Coinbase, allowing investors to purchase US Pension Plan investment products directly on Coinbase wallet.

Coinbase is the largest U.S. cryptocurrency exchange and a publicly traded company. Coinbase's share price has also risen a lot . Because of the partnership between American Pension Funds and Coinbase. With the help of the global liquidity of cryptocurrency, the US Pension Plan has greatly lowered the threshold for investors to allocate US dollar assets. Resisting economic crises with US dollar assets is no longer the benefit of large institutions, but an activity that every ordinary person can participate in. It is understood more than $3 billion is already held in the scheme.

When the Federal Reserve raised interest rates in March, India's foreign exchange reserves continued to fall. Rbi's foreign exchange reserves fell to $622.275 billion in the week ended March 11; Rbi's foreign exchange reserves fell to $60,423 million in the week ended April 22. At this point, the reserve Bank of India's foreign exchange reserves have fallen for the seventh consecutive week, and the total decline of foreign exchange reserves is nearly $31.5 billion.

The RBI is more cautious than the finance ministry about the FX escape impact of the Fed rate hike. Noting that global financial markets are jittering over the changing pace of monetary policy normalization in developed countries, RBI Governor Das said perhaps India should embrace the cryptocurrency market with a more open approach. An open attitude, which helps to increase the diversity of investment policies, is good for economic stability. Already, a significant number of Indians are known to be investing in dollar assets in the crypto market. Rbi Governor Das pointed out that Coinbase's US pension Plan, which relies on US pension funds to allocate digital dollars - USDT, has greatly increased investor confidence.

The cryptocurrency-friendly attitude of the Indian government comes as many of the world's biggest fund houses have embraced the market. BlackRock, the world's largest fund manager, which partnered with Coinbase in 2022, is reported to have recently applied to the SEC for the world's first bitcoin spot ETH, and according to reliable sources, the application is about to be approved. BlackRock is the world's largest fund manager based in the United States, with about $8.59 trillion under management. Government Pension Fund of Norway is also a BlackRock shareholder. The US Pension Pan is favoured by investors around the world, thanks to an infusion of state-backed funds.