2023-01-10 11:47:07
Is 2023 going to be a turd for investors? The Fed is making a fuss...
We've been posting hopium reports in which funds and companies were talking about the possibility that 2023 might not be as shitty as 2022...Um. Of course, no one started getting happy, but we didn't have to. Or we should.
Let's get to the bottom of this, young crypto-mogul. As you remember, last year, the U.S. Federal Reserve raised interest rates from almost zero to 4.25 to 4.5 per cent. And in 2023, the Fed may raise that rate to 5 per cent, which drove the U.S. fund down...
So, let's explain what this is all about.
There are two kinds of rates: discount rates and federal funds rates. The first is the rate the government lends to financial institutions. But nobody cares about it because it is miserable. It's as tiny as your deposit. But the second one is the Fed's rate, but the media call it "the interest rate" or "the discount rate" because it's easier.
In the U.S., all these banks/organisations must keep some part of the dough in the Fed as reserves. Long story short, when the day ends, the banks may have more or less money than they need to meet these reserve requirements. And so, they're churning the dough back and forth amongst themselves. And the Fed's rate in this dough market = the effective interest rate, which is the sum of all the payments that the borrowing organisation has to make in this circle. And you know, lending at a lower rate is better, right?
The lower rate - the more money goes to the charts. The higher rate - the money goes from the charts in more classic instruments a la bank deposits.
So what?
You shouldn't expect a bull run every day. Crypto channels are piling hopium bottles around like crazy ones, but always remember to live in the here and now. Build projects, develop yourself and network, and do not stupidly wait for the bull run like a dick.
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