What are the current unfavorable factors in the market?
- Macroeconomic Aspects
Although some of the unfavorable macroeconomic factors observed earlier have shifted to expectations of interest rate cuts by the Federal Reserve, increasing the probability of a rate cut in September, the direct game between Trump and the conservative faction of the Federal Reserve still brings strong uncertainty to the rate cuts in 2025. Some institutions, including American banks, believe that inflation is trending upward, especially with the impact of tariffs on consumption and inflation, which may lead the conservative faction within the Federal Reserve to maintain a cautious stance.
- Bloodsucking in the Bond Market
In the past week, the auction of U.S. Treasury bonds saw an increase in medium- to long-term purchasing demand. Investors' willingness to allocate long-term funds remains solid against the backdrop of expected interest rate cuts, and risk appetite has not improved. Major funds are still concentrated in the bond market, while the Treasury Department has expanded the issuance scale of 5-year and 10-year TIPS. Under the dual pressures of inflation and high deficits, the pace of bond issuance has not only not slowed down but has continued to increase. This means that the extraction of liquidity from the market by government bonds is ongoing, and large-scale bond issuance will directly siphon off some funds from the risk market.
Especially in a high-interest-rate environment, money market funds and banks tend to allocate funds to government bonds rather than stocks, corporate bonds, or crypto assets. This diversion effect has the most direct impact on reducing investment in the risk market in the current macro environment. To put it bluntly, the bond market is bloodsucking in the risk market, and this situation will only change when monetary policy genuinely shifts towards easing.
- Movements of Ancient Whales
In the realm of cryptocurrency itself, there have been frequent activities of ancient whales in the past month. After a sell-off of 80,000 coins last week, there have been several transfers of ancient whales this week. Although these transfers did not directly go to OTC or exchanges for sale like last week, some investors still feel panic due to past experiences. However, to be honest, if it is merely the sell-off of ancient whales, it will not change the medium- to long-term market trend.
Even if it causes some short-term market impact, as long as the narrative of the market remains unchanged, it can bounce back just as easily as it fell.
Overall, the main game in the current market still revolves around the monetary policy between Trump and the Federal Reserve. Achieving interest rate cuts as soon as possible can indeed alleviate the unfavorable factors mentioned in points one and two.
This article is sponsored by #Bitget ｜ @Bitget_zh
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