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The US dollar interest rate hike is a global burden! Why are countries tightening their belts collectively?
The US dollar is the currency of the United States, but it is a global financial shackle! The Federal Reserve's interest rate hike drives the dollar to strengthen, and under the appearance of declining prices of bulk commodities, most countries around the world are in distress. The crypto market is also experiencing liquidity tightening and asset selling pressure due to the return of funds to the dollar. This global wealth harvesting led by the dollar hides the most straightforward logic of financial games.
The core driving force behind the Federal Reserve's interest rate hike is the dollar magnet effect: high interest rates make dollar deposits a hot commodity for global capital, prompting countries to sell their own currencies to buy dollars, directly pushing up the dollar exchange rate. This is also an important reason for the outflow of funds and price fluctuations in the crypto market. While global bulk commodities are priced in dollars, it seems that the dollar's appreciation causes price drops, but in reality, it is just an exclusive benefit for dollar holders. Gold is being sold off massively due to lack of interest income, and crypto assets are facing corrections as funds shift towards lower-risk dollar assets.
Non-US countries face a dual blow from exchange rates and inflation: the depreciation of their currencies often far exceeds the price drop of commodities. It may seem that oil and gold prices are falling, but in reality, import costs are skyrocketing, directly triggering imported inflation. Countries are also caught in a dilemma: following interest rate hikes to protect exchange rates comes at the cost of difficult corporate financing and economic contraction; maintaining low interest rates to protect the economy could lead to a crisis of currency collapse and soaring prices. Emerging markets with high external debts are particularly on the brink of a debt explosion.
China, as the world’s factory, finds the strong dollar to be a double-edged sword: moderate depreciation of the yuan benefits exports but also increases the cost of importing energy and raw materials. However, the self-sufficiency advantage of the entire industrial chain combined with cross-border settlements in yuan becomes a key moat to break free from the dollar trap and provides an opportunity for the internationalization of the digital yuan.
The essence of dollar hegemony has always been to manipulate the flow of global wealth through changes in interest rates and exchange rates. Whether in traditional markets or the crypto market, it is difficult to escape the suppression of dollar liquidity in the short term.
How long do you think this round of the dollar's strong cycle will last? How should the crypto market resist the impact of dollar liquidity?
