We can prepare for a bigger rate hike than the U.S. predicted

At 11 a.m. today, bitcoin prices fell to 27.4 million won based on Upbit, the lowest level in 18 months since December 2020. 바이낸스 거래소 입금 A few hours later, it is now maintaining the 29.5 million won level. Many people believe that this season has already ended, so the market’s feeling around virtual currency is at the level of “fear.”  The reasons for the constant decline in Bitcoin prices over the past two months are the Russia-Ukna War, the LUNA crisis, and the U.S. interest rate hike. In particular, the U.S. consumer price index CPI released the day before yesterday showed the highest inflation rate in 41 years, continuing anxiety in the global economy.

Today, we will tell you that we can prepare for a bigger rate hike than the U.S. predicted.

The U.S. interest rate hike is imminent, is it a giant step or a big step?

As the U.S. consumer price index rises more than expected, there is growing speculation that the Federal Reserve may take a “Giant Step” to raise its key interest rate by 0.75 percentage points at once, not 0.5 percentage points previously announced. If there is a 0.75 percentage point rate hike, this will be the first time in 28 years since 1994.

According to the Wall Street Journal, the Federal Reserve reported on the 13th that the Federal Open Market Committee (FOMC), which will be held for two days on the 14th and 15th, may consider such a plan.The Federal Reserve previously raised its key interest rate by 0.5 percentage points last month (Big Step), and said it will carry out a few more “Big Steps.”

However, as May’s consumer price growth rate was announced at 8.6%, the highest in 40 years, critics point out that it is difficult to stabilize prices with a “big step.”

The New York Times also predicted on the same day, “As inflation levels are higher than expected and last longer, the Federal Reserve is likely to discuss the biggest rate hike since 1994 at the FOMC.” After the two-day meeting, the Fed will unveil a new benchmark interest rate on the afternoon of the 15th (early the morning of the 16th in Korean time).

Chairman Jerome Powell has repeatedly said he does not rule out the possibility of conducting a “Giant Step.” Last month, he said, “We can take more than a big step. If we don’t do this, we need solid evidence that inflation levels are low and prices are stable, and if we don’t have evidence, we can also consider more aggressive moves.”

On the same day, the Federal Reserve Bank of New York reported an expected inflation rate of 6.6 percent over the past year, the highest since it first began its survey in June 2013, the same as in March this year. High inflation expectations are likely to increase wage demands, which will adversely affect real prices.

Wall Street financial firms have also bolstered this “Giant Step” outlook. Investment banks Jeffries Group and Barclays predicted that there would be a giant step at the FOMC shortly after the consumer price index was released in May. “The Fed’s response to prices is late,” said Grand Thornton, chief economist at financial investment firm. They are also aware of this and will probably raise interest rates by 0.75 percent.”

According to FedWatch, the Chicago Mercantile Exchange, which predicts monetary policy through interest rate-future trading, the FOMC predicted a 0.75% increase in interest rates at 97 percent as of the afternoon of the 13th, while only about 3 percent expected a 0.5 percent increase. A week ago, the prospect of a 0.5% increase was 95%. In just a week, the outlook has changed to this extreme.

What is the impact on domestic interest rates?

Meanwhile, domestic authorities are also agonizing over the consequences. This year, the Bank of Korea’s Monetary Policy Committee remains four times. The industry predicts that the Bank of Korea will raise interest rates first at the Monetary Policy Committee scheduled for July and August. The Bank of Korea has never done a big step before. There are even predictions that we can do a big step this time.

It is clear why the Bank of Korea should raise interest rates. Korea’s consumer price growth rate in May was 5.4%, lower than that of the United States, but it was the highest in 13 years and 9 months. This is well above the Bank of Korea’s long-term inflation target of 2%. Lee Chang-yong, governor of the Bank of Korea, expressed concern that raising interest rates could increase the difficulties of the vulnerable, but if inflation increases due to missing the timing, the damage to the economy could be greater.

Meanwhile, there is a possibility that interest rates in Korea and the United States will be reversed. The key interest rate gap between Korea and the United States is a little higher in Korea by 0.75-1 percentage point. The Bank of Korea has been raising interest rates continuously since August last year, but if the U.S. takes a series of big steps in June and July, interest rates between South Korea and the U.S. will be reversed.

But it’s not easy to raise interest rates if you think about household debt of over 1900 trillion won. According to the Korea Economic Research Institute, if the benchmark interest rate rises by 1 percentage point, the annual interest to be paid by households will increase by 19 trillion won. Companies are also likely to find it difficult to raise funds and the economic slowdown will continue.

Cho Young-moo, a researcher at LG Management Research Institute, said the Bank of Korea will raise interest rates at least three times out of the four remaining Monetary Policy Committee, and the possibility of a big step cannot be ruled out. However, he said that the reversal of interest rates between South Korea and the U.S. is difficult to avoid, and that the effect of curbing inflation will not be significant and will serve to slow the economy.

Investors’ Precautions

At 11 a.m. today, there was a bitcoin crash that broke the previous low of $2,6500 in just 18 months. Bitcoin prices, which were around $31500 eight days ago, almost collapsed to the $20,000 level this morning. The market was literally in a panic.

No favorable factors, such as the U.S. interest rate hike and the rise in global raw materials and food prices caused by the Russian war, have been resolved, and we do not know when they will be resolved.

Whenever I deliver economic news, I post a message that I want long positions and spot investors to be passive in investing as much as possible. I feel like the thing that will come this morning has to come.

But the decline is not over. On May 22, bitcoin prices reached $26,000 and then went up, but they actually went up without a price tag to support. Today, $20,000 has fallen sharply enough to be threatened, and there are almost no past sales figures left.

It is difficult to predict an upward trend easily from the technical analysis of the chart or from the favorable and unfavorable aspects of the chart.

In this atmosphere, it seems advantageous to enter the short position (short selling) as much as possible. In the case of the long position, it seems good to aim for a rebound amid the downward trend.

On the other hand, this downward trend is rather an opportunity for futures investors and a stage where they can see big profits.

You can actively use the short position. Unfortunately, the domestic exchange does not allow short positions in the case of virtual currency, so you have to use overseas futures exchanges.

There are people who have vague anxiety or prejudice about futures trading futures. This is because I didn’t have a chance to understand the futures trading exactly.

In order to deposit money to a futures exchange, you must select a major exchange that has passed the domestic treble and complete KYC certification (identification) for each exchange. This is the same as the procedure for identification on domestic exchanges such as Upbit and Bithumb.

The Bitget exchange registration and KYC certification that I recommend are so simple that it takes less than 10 minutes. In addition, there is an additional subsidy event of up to $4163 for new subscribers, so I hope you will receive benefits. In addition, if you sign up through the link in the comments below, you will receive a 50% fee for life.

Various information on futures transactions, how to sign up for the exchange, authentication methods, and trading methods to be used in practice are left as links in the comments section below, so I hope you can use them.

Today, we looked at the impending U.S. interest rate hike and Korea’s interest rate outlook.