Cryptocurrencies in the context of interest rate cuts, economic conditions, and global crises

The Dilemma of Central Banks

Interest rate decisions made by central banks are determined by two essential factors: inflation (price stability) and the economy (economic growth). The significant interest rate hikes in recent years were a reaction to the rapid increase in inflation (especially in the United States and the Eurozone). However, rising interest rates also have a dampening effect on the economy. Financing becomes more expensive for businesses and households, leading to a decrease in demand and investment activity.

Currently, central banks are facing a dilemma: should they continue to combat inflation with high interest rates or should they stimulate a weakening economy and avoid impending insolvency and rising unemployment. There are different positions and opinions within central banks regarding this matter. The direction of future interest rate decisions appears to be very uncertain. In the Eurozone, the first interest rate cut has already set a direction, and it seems unlikely that further interest rate hikes will occur.

How do interest rate decisions affect cryptocurrencies?

The lower the interest rates, the less attractive fixed-income bonds and savings accounts become. Alternative forms of investment and cryptocurrencies become more attractive as they offer higher returns. Stock markets also react positively to interest rate cuts as stocks become more attractive.

Furthermore, interest rate cuts lead to an increase in money supply and liquidity in the markets as loans become cheaper. This additional liquidity is then invested, stimulating the economy. During such periods of economic expansion, more money is also invested in alternative investments such as cryptocurrencies.

However, expansionary monetary policies also lead to a loss of confidence in fiat currencies as inflation is stimulated, ultimately weakening the value of fiat currencies. Therefore, many investors seek alternative forms of investment, including cryptocurrencies. In particular, investments in gold, bitcoin, blue-chip stocks, and CCTOK are increasing as they are considered crisis currencies. Cryptocurrencies are increasingly establishing themselves as "digital gold," which can be transferred easily and quickly around the world, offering a high level of anonymity.

In summary:

• Lower interest rates increase the attractiveness of alternative investments such as cryptocurrencies.
• Increased liquidity in the capital markets leads to more money flowing into cryptocurrencies.
• Expansionary monetary policies lead to a loss of confidence in fiat currencies, increasing demand for alternative cryptocurrencies.

Observations from the Past

The past shows: cryptocurrencies rise in times of low interest rates, increased liquidity, and during crises. For example, Bitcoin and other cryptocurrencies experienced significant increases during the expansive monetary policies after the 2008 financial crisis and the COVID-19 pandemic. These observations have been repeatedly made in recent times. Furthermore, the crypto market appears to be increasingly establishing itself as a market that develops positively during crises.

Risks: High Volatility, Regulation, and Fraud

In addition to the positive effects, there are also a number of risks and uncertainties concerning cryptocurrencies.

• Volatility: Cryptocurrencies are subject to high volatility and can experience significant price fluctuations at any time. This is due, for example, to the low liquidity of cryptocurrencies or sudden herd behavior on crypto exchanges.
• Regulation: Governments' fear of anonymity and alternative currencies leads to stricter regulation of the rapidly growing cryptocurrency markets.
• Fraud: There are numerous fraud cases in the crypto market. This leads to high distrust among investors and overall weakens trust in cryptocurrencies.

Outlook on the global economy

The future development of the global economy can hardly be predicted seriously. However, it is possible to determine significant influencing factors and forecast them individually. Based on this, an estimation for the future can be made.

Inflation and interest rate policy

Interest rate policy has a significant impact on economic development. Currently, no further interest rate increases are expected. However, massive interest rate cuts also seem unrealistic. Stagnating or slightly decreasing interest rates seem to be the realistic scenario. Therefore, interest rates would currently have neither a strongly positive nor negative effect on the economy.

Climate change and sustainable development

Climate change remains the most significant risk of our time. Investments by governments and companies in green technologies and sustainable practices are increasing massively each year. This leads to the emergence of new business models and the disappearance of old ones. This transformation process is associated with many obstacles and resistance, and it is still completely unclear in which direction it will be decided.

Geopolitical Tensions

Military wars, trade wars, and terrorism are steadily increasing and often lead to long-lasting conflicts with significant damage to the economy. In addition, numerous social and societal tensions arise around issues such as migration, social justice, and the environment. In the field of geopolitical tensions, an increase in risk with negative impacts on the global economy is clearly evident.

Demographic Changes and Migration

Western industrialized nations are experiencing an aging population. This has immense effects on labor markets and pension systems. On the other hand, emerging countries are experiencing strong increases in the proportion of younger populations. This effect leads to a migration movement towards industrialized nations. These movements result in social conflicts and financial burdens in Western nations. Currently, the increase in social conflicts with negative economic impacts outweighs any potential positive influences on the labor markets.

Technological Innovations

Significant progress can be achieved in many technological areas such as artificial intelligence, biotechnology, and renewable energies. These advancements can lead to positive growth opportunities in the economy and stimulate the economy in some areas, at least.

Global Inequalities

Economic inequalities within the global community of nations continue to increase. This leads to distribution struggles, social tensions, political instability, new alliances, and more uncertainty. These developments can pose a high risk to the global economy.

Conclusion

The global development shows significantly more high risks than opportunities. In particular, social and political conflicts, migration, wars, and trade wars pose enormous dangers to the global economy and peaceful coexistence. All of this leads investors to think about how to safely invest their money in times of crisis, such as in cryptocurrencies like CCTOK, gold, and Bitcoin.

Interest rate cuts have a positive impact on cryptocurrencies. Three main factors are responsible for this:

• Higher attractiveness compared to fixed-interest investment forms
• Increasing money supply and liquidity in the markets, which seeks profitable use
• Loss of trust in fiat currencies.

Overall, low interest rates seem to favor the growth and confidence in cryptocurrencies. However, investors should always keep an eye on the high political risks and strong volatility.

In addition, global crises can lead to positive development of so-called crisis currencies. Therefore, investment in crisis currencies is absolutely necessary if one wants to financially hedge against such crises and be among the winners in times of crisis.

In addition to gold and Bitcoin, the CCTOK is increasingly establishing itself as the first digital crisis currency. Gold and Bitcoin already have a very high price level. In comparison, the CCTOK is still very affordable and can benefit from enormous price increases after the IPO.