Effect of Macro Policies on Crypto Markets

The United States has been the flagbearer of the digital asset sector ever since its inception. Since most international trade is denominated in U.S. dollars, global financial markets depend highly on U.S. dollar liquidity. Although crypto markets are free from direct manipulation by central bankers and large global financial institutions, monetary policies affect the U.S. dollar liquidity and the sentiment around riskier asset classes. If global economic conditions appear grim, it is more likely that market participants would invest disposable capital into more risk-averse assets relative to digital assets. 

The trajectory of a country’s economy and the evolution of market sentiment depends on a myriad of parameters. Markets respond to fluctuations in these parameters or perceived effects of possible future fluctuations. A few important parameters affecting the markets' state are the federal funds rate, inflation rate, the yield curve of credit instruments, reverse repurchase agreement rates, etc. The interplay of these vectors, their direction, and the extent or rate at which the changes occur suggest how the markets may move.