Debunking The Myth Of Interest Rates

GM Readers!📪 It's BitDegree Insider, and let's do some myth busting.

⭐️Today's selection:

• 🏦FED & Interest Rates
• 💵Million-Dollar Bet
• 🧋Wednesday Bubbles
• 👌Selected Meme of The Day
• 📰Bite-Sized News

FED MOMENT

So, FED is expected to raise interest rates. But... how much does it really matter? Does it matter at all???

Does the key interest rate in the US affect the crypto markets?

The key interest rate is the percentage at which the central bank lends to banks and accepts deposits.

This tool can be used to influence inflation. For example, when the rate rises, money in the economy becomes more expensive.

Therefore, investors eagerly await the US Federal Reserve meetings, where the chairs may announce a change in the rate.

For example, since March 2022, the Fed has been raising rates at a record pace several times.

Throughout this period, the crypto and stock markets have been continuously falling.

It seems logical: the rate rises, the dollar strengthens, and markets adjust. Therefore, investors believe that the Fed is to blame for the market decline.

As a result, financial media has been intensely discussing every Fed meeting in recent months, as investors fear that further rate hikes will trigger an even greater drop in stocks and cryptocurrencies.

But is this true? Should we fear further declines due to rate hikes?

Forget everything you've read about rate hikes and cuts.

Monitoring the key interest rate is a waste of time because rate cuts and increases do not have a direct impact on the markets.

Let's examine the influence of the rate on both the stock and crypto markets as an example:

• Since March 2022, the rate has been rising, and the crypto market has been falling.
• But for 2 years before that, the rate did not change, and during that time, the crypto market grew more than 15 times.
• From 2015 to 2017, Bitcoin's price rose almost non-stop from $150 to $20,000, then crashed to $3,000 by the end of 2018. Throughout this time, the rate was continuously increasing.

As you can see, there is no correlation. The crypto market lives its own life, regardless of key rate hikes or cuts.

Is there a correlation in the stock market? Let's check:

• Since March, the rate has been rising, and the stock market prices saw a correction.
• From March 2020 to March 2022, the rate did not change, but the stock market continuously grew during this time.
• From 2009 to 2020, the stock market continuously grew, while the rate did not change from 2009 to 2016 and only began to increase significantly from 2017 to 2020.

If we look at even earlier periods, the situation is the same: the stock market lives its own life, and the rate lives its own. Sometimes they correlate, and sometimes they don't.

What is the conclusion?

There is no direct correlation between the key interest rate and the markets. Markets are influenced by millions of different factors, and the key interest rate is just one of them.

Therefore, it is impossible to build your investment strategy based on one factor: interest rates, halvings, hash rates, stock market movements, analyst forecasts, moon phases, or anything similar.

If you see news or a post about the key interest rate, you can confidently skip this useless information.

Stay educated, stay with us and good luck on your crypto journey!

TL;DR: Many analysts overemphasize the importance of interest rates imposed by the FED. According to how the market reacted previously, the correlation is not there.

MILLION-DOLLAR BET

So here's an update.

Coinbase's ex-CTO lost the dispute over the price of BTC and had to pay his opponents.

And... Extra $500K to someone else.

Here's what's up.

In mid-March, former Coinbase CTO Balaji Srinivasan made a bet with a certain James Medlock on Twitter.

The former executive director of the exchange claimed that the US was on the verge of hyperinflation, and by June, the BTC rate would "break the ceiling" at $1 million.

According to the terms of the agreement, if this forecast turns out to be wrong, Srinivasan commits to paying $2 million in USDC to both Medlock and another participant in the dispute, as well as to charitable organizations.

Yesterday, March 2, Srinivasan voluntarily closed the bet.

"I just spent a million to prove to you that they print trillions," he commented.

Srinivasan has not abandoned his hypothesis about the upcoming hyperinflation.

He still believes that the States are facing a prolonged crisis.

He paid Medlock $500,000, the same amount to Bitcoin Core developers, and the charity "Give Directly." 

He explained his decision as follows:

"I don't have a habit of publicly 'burning' a million. I spent this money to send a noticeable signal that something is wrong with the economy and the 'landing' won't be as soft as Powell (FED Chairman) promises."

When asked to comment on the situation, Medlock replied:

"I don't see it as robbery. It's more like a peculiar form of taxation."

At the time of writing, BTC is trading at around $28,265.

WEDNESDAY BUBBLES

SUI has been listed on Binance at a starting price of $1.7.

However, it's important to note that SUI's current price is quite volatile across different exchanges, and the Fed can serve as a reference point for traders in the short term, so it's likely that we'll continue to see some volatility today.

Since the picture covers past week's performance, SUI will get featured only next week.

Our complete review of SUI launch will be shared tomorrow, so stay tuned.

SELECTED MEME OF THE DAY

BITE-SIZED NEWS

• Traders Attempt to Use TrueUSD Depegging for Their Own Advantage. It is believed that TUSD lost its $1 peg due to insufficient liquidity.
• White House's Council of Economic Advisers Promote 30% Crypto Mining Energy Tax. Supposedly, it harms the environment, quality of life, and electricity grids.
• Bhutan May Soon Host Eco-Friendly and Carbon-Free Crypto Mining Operations. The new initiative may bring economic growth to the country.