What is Powell going to say? Will the Fed slow down the interest rate hikes because of the epidemic?
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Fed Chairman Jerome Powell will discuss the Fed’s performance on Tuesday when he testifies to the Senate Banking Committee considering his nomination for a second four-year term, with the hearing set to begin at 23:00 (GMT+8).
Huobi Study Club believes that lawmakers' will focus on policies and Powell's views toward the policies, including when to rise interest, when to taper, his opinions on Omicron, and whether to adopt bank capital standards tied to climate risk.
Another question Powell is likely to be asked is when and how policymakers will actually shrink the Fed's $8.8 trillion balance sheet.
For the above sensitive topics, overnight pre-released Powell's testimony speech did not reflect any answers.
Actually, the market has begun to pay more expectations for a rate hike in March since the Fed released a rate hike signal last week.
Goldman Sachs estimates the Fed to raise interest rates four times this year, which hold the same views as JPMorgan Chase and Deutsche Bank’s analysts.
The Fed is expected to focus on the balance sheet at the January meeting earlier and faster, according to Bloomberg Economic Research.
It is universally acknowledged that once the Fed starts to taper and increase rates to "cool down" the market officially, risk assets including cryptocurrencies may fall.
U.S. stocks fell sharply yesterday and Bitcoin also fell below $40,000 which is the first time since September 22 last year, down $29,000 from its high in November last year.
Huobi Study Club believes that the market has already digested the previous impact regarding the Fed's rate hike. However, it is not excluded that the cryptocurrency market will reach another lower record when the fall of global assets builds a systemic risk in the current situation.
There are some views in the market that can be analyzed. Some believe that the Fed might control the pace of interest rate hikes due to the expansion of the Omicron.
But in fact, the U.S. economy has shown signs of a liquidity trap in the process of the previous massive money increase. A large amount of money into the investment market, while the effect of helping economic recovery is not achieved, so it will not adjust the pace of interest rate hikes because of the epidemic.
In addition, there is a view that the impact of interest rate hikes on cryptocurrencies is limited. However, Bitcoin price keeps falling and follows the US stock market since the Fed's interest rate hike broke out in the market, which makes it very sensitive to the interest rate hikes.