The cryptocurrency market enters a new wave of growth, and if in 2017 this wave was largely provoked by the exit of Bitcoin on the Stock Exchange and the beginning of futures trading, which was regarded by the markets as the green light of the expansion of cryptocurrencies into the financial instruments sector, the reason is completely different now.
On March 20, the US Federal Reserve announced the completion of the growth rate cycle, and this announcement was accompanied by a deterioration of macroeconomic forecasts.
The natural interest rate is a short-term rate that occurs when the economy has reached maximum employment and has a stable inflation. Approximately, this picture is observed at the current moment - employment is at the level of multi-year lows, while inflation is close to the target of 2% and fluctuates slightly. According to Taylor's rule, the Fed must increase the federal funds rate if inflation goes above its target level or unemployment decline below the natural rate, and reduce it if the reverse occurs. From this point of view, the Fed has now no reason to increase the rate. At the same time, a number of criteria indicate that a recession is approaching, and if negative trends develop, the Fed will be faced with the need to lower the rate.
Similar processes occur in the economies of other developed countries. Before the 2008 crisis, the rates (with the exception of Japan, which has been struggling with deflation for many years) ranged from 4% to 6%, which made it possible to reduce them to zero in the framework of the fight against the crisis.
Now, the rates are already at near-zero levels, and the possible arrival of a recession excludes the possibility of reducing the rates as part of the fight against it. This tool by the Central banks have been completely exhausted. Leaving rates deep into the negative zone will lead to the need to ban cash, which, in turn, can significantly increase the crisis.
This means that Central banks need to seek unconventional methods of dealing with the crisis. Ten years ago, quantitative easing and asset redemption programs became their method. Since then, central bank balances have remained bloated, which automatically limits the use of this tool in the fight against the new crisis.
What other methods of dealing with the crisis remain, if all the traditional ones have been exhausted? The answer to this question will become obvious if we summarize the requirements. In their first approximation, they look like this:
- to prevent clustering and de-dollarization of world trade;
- to prevent the decline in bank income;
- to stimulate the economy without the use of traditional resources that have exhausted themselves - emissions and lower rates;
- to prevent the creation of a parallel cash contour based on a non-US dollar.
The solution of all these problems is possible in several steps with the help of a complex scheme. The essence of which is the need for the banking system to intercept control over the rapidly developing sector of cryptocurrencies.
The first stage will be replaced by the expansion of stablecoins - cryptocurrency tokens, which will be issued by large banks and corporations. Their goal is to revive the consumer market and test the technology for the third and main step - the release of cryptocurrency by Central banks. To attract institutional investors to the market, the launch of the Bakkt cryptocurrency exchange is being prepared, the Intercontinental Exchange (ICE), a giant that owns 23 exchanges, including the world's largest New York Stock Exchange, is engaged in implementation.
The world is on the verge of a new wave of expansion of cryptocurrencies, which will be caused by the need to arrest the threat of recession. Thus, cryptocurrencies will have to assume the role of "quantitative expansion".
The main focus will be on the stablecoins issued by large banks and corporations, that is, cryptocurrencies, the value of which will be tied to the US dollar, but will also affect other popular tokens, primarily Bitcoin. Bitcoin, in turn, drags the crypto market as a whole.
Technically, Bitcoin is already ready for the most important step, coming close to the resistance zone 5700/6100, which for several months served as a support last year. Its passage will provoke a sharp increase in the cryptographic market as a whole, especially if it coincides with the decisions of the SEC to resolve the pending ETF launch projects and the opening of the Bakkt exchange.
