Cryptocurrency Investment Strategies Under the Macro-Economic Changes

The current global economic situation is undergoing significant changes, which brings new opportunities for the Crypto Assets market. As some central banks in certain countries begin to cut interest rates, the Crypto Assets market is expected to recover from the summer slump, indicating that a new bull market may be on the horizon.

Since 2009, Bitcoin and other Crypto Assets have been powerful tools against the traditional financial system. In the context of the current macroeconomic changes, actively going long on Bitcoin and altcoins may be a wise choice, and the token issuance of new projects is also worth paying attention to, as the market may be poised for a strong rebound.

The USD-JPY exchange rate is an important indicator for observing macroeconomic trends. To strengthen the yen, the G7 central banks seem to choose to make the market believe that the interest rate differentials between the yen and other major currencies will gradually narrow. To achieve this goal, the other G7 central banks, apart from the Bank of Japan, need to lower their higher policy interest rates.

It is worth noting that the policy interest rate of the Bank of Japan is only 0.1%, while the rates in other countries are around 4-5%. The interest rate differential between currencies is a fundamental factor affecting exchange rates. From March 2020 to early 2022, central banks around the world basically adopted the same low interest rate policy. However, when inflation became serious, the central banks of the G7 countries, except for the Bank of Japan, actively raised interest rates.

The Bank of Japan finds it difficult to raise interest rates because it holds more than 50% of Japanese government bonds. If interest rates are allowed to rise, the Bank of Japan will face huge losses. Therefore, the only option to narrow the interest rate gap is for other central banks to lower their interest rates.

Traditionally, when inflation is below target, central banks choose to lower interest rates. However, currently, the inflation rates in G7 countries are all above the target of 2%. Nevertheless, the Bank of Canada and the European Central Bank are still lowering interest rates in the face of inflation being above target, which is an unusual practice.

These interest rate cuts may be aimed at addressing the issue of the weak yen. If the yen cannot be strengthened, it may trigger a devaluation competition among other countries' currencies, which could ultimately threaten the U.S.-led global financial system.

The upcoming G7 meeting will attract significant attention. They may announce some coordinated action to strengthen the yen, or tacitly agree that other countries, excluding Japan, will start to cut interest rates.

Whether the Federal Reserve will start cutting interest rates as the U.S. presidential election approaches is an important question. Typically, the Federal Reserve does not change its policy on the eve of an election. Given the current political situation and economic conditions, the Federal Reserve may choose to maintain its existing policy.

With the changes in global central bank policies, the Crypto Assets market may recover from the summer slump. Peripheral central banks have already started a loosening cycle, and this trend may continue.

In this macro environment, investment strategies may need to be adjusted. Going long on Bitcoin and other potentially promising altcoins may be a wise choice. For projects considering issuing tokens, now may be a favorable time.

For investors holding synthetic USD cash and earning high returns, now may be a good time to redeploy funds into promising altcoins. Overall, the Crypto Assets market seems to be waking up, and a new bull market may be on the horizon.