Hi Guys,
The Federal Reserve has increased interest rates, The European Central Bank will stop QE, it seems the occidental economy is starting to grow.
Will it benfit the cryptocurrency market in his whole or it will drain money from it toward classic investments?
what do you guys think about it?
What's your opinion/analysis?
Increased interest rates do not make economy grow, as higher interest rates encourage people to lend money. At the same time, they make it difficult for entrepreneurs to borrow money.
When it´s hard to borrow money to make your own business the economy does not grow.
Usually government increases interest rates to reduce inflation rates and to attract money to the country.
This is why dollar is on a bull run, because everyone is buying dollar so they can invest in the US at high interest rates. There is no reason to invest in high risk countries, unless they increase even more their interest rates.
I think this higher interest rate may have a negative effect on crypto (not much) and a negative effect in stock market.
This is may be good opportunity to bonds in the US, so smart money may go that way.
actually an increasing of inflation is caused most of the time by an increasing of demand on supply in goods markets (due not only by money supply factors)... central banks keept low interest rates in order to encouraging money lending from banks to entrepeneurs...
another thing: people don't lend money, they borrow money... banks lend money at higher interest rate of FED funds...
we're talking about the same thing from a different point of view!!
anyway you're pretty right about investors buying dollars in order to buy securities and government bonds that have an higher interest rate now, this will lower the price of these asset then!! and risk countries have an higher interest rates because they are risky, not only because of monetary policies.
