The Fed's Rate Cut Is A Double-Edged Sword for Crypto and the Economy
I came across an article on the Web about the plan of the Federal Reserve to cut interest rates, my very first reaction was that it was an issue of utmost excitement and grave concern.
Let's be honest, lower interest rates sound awesome in theory.
Lower mortgages, accessible loans, and more money to invest? Count me in. Still, as I have come to learn a bit too painfully over the years, finance is rarely that simple.
I remember back in 2021 when rates were at their bottom floor. My crypto portfolio was at all-time highs and, boy, did I think I was some kind of genius. Then, in about a year, the feeling of a hangover from all that easy money whammed in pretty hard. Inflation went parabolic, the Fed needed to slam on the brakes, and my precious coins came crashing back down to earth.
Good lesson there in looking beyond the short-term sugar rush of rate cuts.
Sure, Bitcoin and other cryptos might already get a nice boost as more cash flows into riskier assets.
But at what cost is the question?
This means lower rates equate to a weaker dollar, which is a problem for the global financial system that has, until now, been based on dollar hegemony. However, what bothers me is the effect that could have on Japan and its currency. A stronger yen sounds like a minor problem, but the chain reaction it may set off in the markets is even crypto not going to be immune to.
Don't get me wrong, I am still super bullish on crypto over the long haul. More liquidity in the system generally likes alternative assets like Bitcoin. But I just can't shake off this feeling that we're just kicking the can down the road with these cuts to the rate.
I constantly view my crypto holdings as a hedge for the longer-term implications of this monetary policy rollercoaster.
Look, it's really simple: the Fed cannot consistently just hit the "on" button of the biggest printer in the world without something subsequently happening.
My advice?
Don't get sucked into the hype that will keep you on edge for a very short period. Use this rate cut for what it's good for, building a diversified portfolio, not in one's own country's currency, to hedge against the inevitable storm ahead. That means cryptos, stocks, real estate, and yes, even some good old-fashioned cash.
We're all just trying to find our way through this financial landscape, doing the best we can. Rate cuts are a day or two's worth of high, it's the long game that counts. Educate yourself, think critically, and never invest more than you can afford to lose.
It was a painful lesson learned but well taken.
Posted Using InLeo Alpha