Gray Research Director: Federal Reserve's "long-term high interest rates" will put short-term pressure on Bitcoin

On May 16, Gray Research Director Zach Pandl issued a document saying that inflation in the United States is accelerating and energy prices have risen significantly. It is expected that the new Federal Reserve Chairman Kevin Warsh will have to maintain interest rates high. The market generally expects that the Federal Reserve will not cut interest rates before September 2027. This "long-term high interest rate" policy has three major impacts on crypto assets: 1. Pressure on "currency devaluation transactions": the cost of holding interest-free assets such as Bitcoin has increased, and high real interest rates have increased the opportunity cost of holding zero-income alternatives, putting short-term pressure on assets such as Bitcoin. However, Pandl remains optimistic about the prospects of Bitcoin and expects positive regulatory developments, including the CLARITY Act, to offset some of the negative impact. 2. Accelerate the listing of fixed income assets: The yield of dollar-denominated fixed income products is generally higher than that of similar DeFi products. If crypto investors obtain higher returns on tokenized bonds, issuers may push more assets to be linked and promote Fixed income digitization. 3. Growth in revenue of stablecoin issuers: stablecoin issuers such as Circle hold interest-bearing assets but cannot pay interest on the tokens. Rising interest rates directly boost its earnings, and Pandl expects that for every 25 basis point increase in short-term interest rates, Circle's revenue will increase by approximately $190 million. ZachPandl concluded that the long-term development of high interest rates will bring resistance to "currency devaluation transactions", while promoting the tokenization of fixed income assets and increasing the profits of stablecoin issuers.