When Fed Quantitative Easing?🚨Global Liquidity Flood Incoming🚀

Episode Transcript
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Speaker 1 (00:00):
Everybody is asking in the market right now, when is
quantitative easing going to actually happen. We're going to break
it down for you don't want to miss it. Let's
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(00:42):
There's so many different options here. You guys can still
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started on going into self custy. Now, the point that
we wanted to break into today was really taking a
look at que and if you look at the market
and how it has responded with QE over the past

(01:06):
several cycles. This chart right here kind of breaks it
down for you. What you're looking at here is bitcoin
dominance against what we're seeing in terms of quantitative easing.
The green section is easing obviously, quantitative tightening is the red,
and then you have these little gaps that exist in
between these. You'll notice here that during tightening we have

(01:26):
bitcoin dominance going up, it starts to stabilize, and now
we're in a point now where quantitative easing could start
to occur. The key here, though, is the gap in between.
What does that look like over the next few months,
next few days, next few weeks. Let us paint this
out for you guys, because this is very critical on
where the market will respond. One of the things you

(01:49):
can kind of look at here, of course, is where
interest rates have a lot to do with this. So
as you can see here, quantitative easing begins when we
start to see the Fed funds rates start to dip
below two percent, and that's this red area that you're
looking at right here, So that's when we see the
injection of capital. All right, So what you're looking at
right here is this little section right here. What that

(02:12):
simply means is this is going to stabilize the market
around easing. This of course, is going to be in
conjunction with a lot of rate cuts that are going
to be coming down the pipe. And this question is
is how many of those rate cuts are going to
be able to get us under that two percent window,
which is where QT or excuse me, QE will begin.
This is the thing that we're looking at right now, polymarket,

(02:32):
how many FED rate cuts in twenty twenty six. Right
now you can kind of see, well, we've got three,
there's a four in there, but if you look at
the chart, you'll start to see that once you get
above four, add those all together, you have fourteen percent
on five, six, six percent, seven, five percent, eight rate
cuts four percent.

Speaker 2 (02:53):
You start to.

Speaker 1 (02:53):
Accumulate all this, and what we're looking at is a
probability of maybe plus forty percent of geting four or
more rate cuts in twenty twenty six. That would be
gargantuan because it starts to lead into something that we've
talked about for a while, and that is the.

Speaker 2 (03:08):
Release of liquidity.

Speaker 1 (03:10):
The reason this plays into liquidity is everybody is parked
in money markets, stable coins, earning yield, all of these things,
those will immediately get impacted and we'll see a drawdown
of that liquidity and it's going to be looking for home.

Speaker 2 (03:25):
Now.

Speaker 1 (03:25):
The key is where are those early market movers going
to go? One thing that could make the FED respond faster,
even faster. What we may see right now in early
twenty twenty six is what's happening in Japan right now.
Nine years ago we had a thirty year government bond
yield hit a record low of point oh two. Now
it's a record of point three point four to three.
This is a huge increase. So basically, the yen is

(03:47):
going to start being able to utilize the market in
terms of how it will affect the US market. And
this of course is going to get into the liquidity
release I'm talking about. Now, let me go to a
clip real quick because this will get into a little
more detail on why the FED might respond to the
Japanese situation.

Speaker 2 (04:04):
Take a look.

Speaker 3 (04:05):
One of the things that could happen is Japan has
been a big buyer of treasuries. Obviously we know China's
also a big buyer of treasuries. Maybe they need to
raise cash in order to support liquidity, they might have
to unload treasuries in order to do so. I think
the FED probably steps in first and doesn't necessarily say
that it's because of this. But there's already a couple

(04:26):
of firms out there talking about the FED needing to
expand its balance sheet again come later this month or
even in January because of the liquidity that's dried up
in some of the overnight lending markets. But it might
be getting uncomfortably tight for the FED, in which case
they will act in order to support liquidity of markets
because one of their mandates, and it's not one that's
talked about very much, but one of their mandates is

(04:47):
financial stability and the proper functioning of markets. So if
they need to do something to support just those overnight
funding markets to create liquidity just for the banks, I
think they will.

Speaker 1 (05:00):
So there's a lot unwrapping here. Of course, many people
would look at this and say, well, listen, if Japan
unwinds their trade against the US Treasury, that puts a
lot of pressure on the Dixie, the dollar. It also
puts a lot of pressure on the United States because
we have chosen the route of stable coins. Now the
question will be if yield is going down on the
stable coins because interest rates are dropping, what happens to

(05:22):
the situation around stable coins. Well, the only solution is
probably going to be velocity, and that's going to get
into how much is it being used? And that's the
key thing that I think has to be done and
adopted here, which is why all this regulation is so
important right now. If you look at Circle stock, this
is the weekly Remember we go way up here after

(05:44):
it's opening one hundred and eighty bucks. Circle has been
declining since then. It's stabilized here over the last month
at around eighty bucks. It's very possible we could see
its IPO.

Speaker 2 (05:53):
Rate around sixty eight bucks.

Speaker 1 (05:54):
Reason being is there will be a lot less liquidity
and a lot less people looking at Circle. I think
in general, I want to play a clip for you
that kind of proves this.

Speaker 2 (06:02):
Take a look.

Speaker 4 (06:03):
Well, we were talking about this last hour. If Circle
is fundamentally a spread play on high interest rates and
the era of higher interest rates is ending, if they
lose one hundred million dollars in revenue every time the
Fed cuts rates by twenty five basis points, that's not
a great name. I mean that would explain why they're
back down towards their IPO price, would it not.

Speaker 5 (06:22):
It's you know, if the business model is sensitive to rates,
it's sensitive to rates. If you're a nim net interest
margin model, then you are beholden to the rate curve. Tether,
on the other hand, you know, is an interesting model.
They retain a lot of that margin and then they
sort of reinvest it on their own balance sheets. So
there's many different models out there. You have things like Athena,
which you're actually in a stable coin that has a
basis trade that generates yields, so it's almost a utility

(06:44):
in the back end. But stables are a good business.

Speaker 2 (06:47):
I'm sure you know.

Speaker 1 (06:47):
Is that Circle right now shares their revenue with coinbase,
and that's a program that's been built really since the inception.
Because of the distribution that Coinbase has, Tether's on a
little bit of a different plane. They of course are
going into more gold, pitcoin things like that. I think
this is going to get very interesting over the next
few months and possibly over the next year of how

(07:09):
stable coins will play out. You may have some new
players that really get into They mentioned Athena is if
you look at algorithmic stable coins, Athena being one of them.
This is something that's being held by World Liberty five.
This could be where markets could vacate into a lot
of other tokens that could line up right here if
you look at what's going on with Ethereum, and if
you look at first movers, anytime you see a market

(07:30):
run within the all coins, it's going to be Ethereum.
This of course is looking at World Liberty Finance and
what their portfolio tokens are right now.

Speaker 2 (07:38):
Eth is their top token.

Speaker 1 (07:40):
Obviously you can see others in there, but I think
the problem will be a lot of people will be
a little bit confused and Ethereum will most likely be
on the front end of this in terms of a win.
All this plays into so many different scenarios. We looked
at this quite some time ago. This was a video
we did a year ago and it was a reference
to the Japanese stable coin and what Sonium was doing

(08:01):
and along with Sony. All this plays out right now
because Sony Blockchain now has partner with startel. This is
the launch of their new stable coin for Sonium and
the ecosystem. Remember the ecosystem as well. One other thing
to consider is how the yen may end up accelerating
its borrow rate to a very low percentage, which will
carry over that. This of course is in comparison to

(08:22):
what we're seeing right now in places like Ave where
you're seeing borrow rates at almost five and a half
percent coming in from Tether, four plus percent right there
on USDC and so on three percent on Rilust. Point
being is this will open up a lot of opportunity.
Now I want to go to a clip real quick
because this will break down a little bit more of
what soda. This of course is the lead over at

(08:42):
Sonium of why the yen could bring in a lot
of new money.

Speaker 2 (08:46):
Take a look.

Speaker 6 (08:47):
You can see it more as a super app. And
connected to this includes a Sonium A future as well.
The chain is well that to be in cooperating with
SBI as well those things.

Speaker 7 (08:58):
One one more things on is we're pretty much focusing
on a stable cooin as well, which is the USD
In the Japanese end. We do have a strong advantage
in a JPR stable coin market because I'm a japaneseanda
and the JPR is the one of the most trusted
currency across the group recognized US one of the most

(09:21):
lowest borrowing rate currency in the market. In the long run,
maybe you can manage a tokenizer stock RWA and a
comporaata things such as gaming, music, movie and so on.

Speaker 1 (09:34):
All Right, So what Soda was getting at there is
that basically it's going to make it very inexpensive to
get loans over there within their ecosystem. This will drive
liquidity into the market that will then escape into other
aspects of crypto in general. If you just look at
the Japanese component around digital lending and how fast it's grown,
this has been fantastic, and this is just the beginning.

(09:56):
So imagine what we see when really global liquidity starts
to hit the market, especially around the United States. Don't
forget this course, is what it looks like USDSEC out.

Speaker 2 (10:09):
There on Sonium.

Speaker 1 (10:10):
They've already started doing one thing, which is starting to
create this priority access is going to create rewards. This
of course gets people to engage. That is another factor.
Then you have all the banks that are now available
for the Sonium platform, and this of course starts to
really encroach on a lot of things. We reported on
this untitled bank some time ago, and.

Speaker 2 (10:31):
I think was this rate here. This is kind of
gives you a connection into Morpho. Morpho.

Speaker 1 (10:36):
Of course the United States lending arm I won't call
of coinbase, but that's one of the biggest partners, and
Morpho continues to climb up the charts in terms of
overall growth in lending. This is why all of this
matters because now you've got untitled blank bank also correlated
with Morpho, now correlated with low cost lending over on

(10:56):
the Sonium blockchain. Hence the end all that is where
it plugs in to liquidity injecting into the system. That's
the key around quantitative easing. That all this plays into.
The other thing you have that the Japanese are doing
is this tax reduction which will take effect in twenty
twenty seven, and it's going from fifty five percent this
is crypto tax, from fifty five percent to a max

(11:17):
of twenty percent. The amount of people in the Pacific
Asian area is going to be massive in terms of
where we can see trades coming into Japan just because
of the tax benefit that they're starting to move. Now,
will Trump do something like that for crypto, It's very
possible that he'll flank that. He's very friendly with the
Japanese Prime minister. But the Japanese have also finalized another

(11:41):
one hundred and seventeen billion in extra budget to fund
this stimulus. This, of course, simply starts to devalue the end,
which means could they be alternately moving to crypto much
faster simply saying well, we're just going to use the
end for interbank transfers, et cetera, and the real value
is going to be built around all of what's happening

(12:01):
in crypto. Take this into consideration. I'm looking at this
tweet right here. This is Blackrock simply saying, hey, another
twelve trillion. They say, US national debt will accelerate, and
the only thing that's going to adopt or basically solve
that is going to be crypto adoption. Now, imagine our
debt compared to the Japanese debt, which is gargantuan even
compared to our debt. If they think it's going to

(12:23):
accelerate here, imagine what it's going to do in Japan.

Speaker 2 (12:26):
Again, back to a new.

Speaker 1 (12:27):
Liquidity portal into the markets could be coming through the
Japanese markets. And this is a global community that has
been out there in the reverse carry trade for quite
some time, and this is pretty much what has propped
up US treasuries. The other thing that plays into this
is this is where it gets interesting because now you
have a lot of community bankers asking the OEC to
block Sony's crypto bank and everything that they're doing here,

(12:50):
So that tells you that they're concerned. A couple of
points in the article, the ICBA says Sony's bank charter
would let it issue deposit like stable coins outside traditional
bank banking rules, not a good thing. The group's concerns
over this trust group are overstated, and this of course
will be driven by big drink bank interests. Point being
is Sony's going to integrate this into a lot more

(13:11):
than just the economy. They're going to go also into
the gaming.

Speaker 2 (13:14):
Side of it. We've talked about this before.

Speaker 1 (13:16):
Nobody likes paying these credit card fees because that's one
of the other areas that are going to get hit.
Here's PlayStation talking about going crypto using the Sony stable coin.

Speaker 2 (13:25):
This could be used for gaming.

Speaker 1 (13:27):
This of course would completely dismantle what's going on in
the market around guess what that's right, credit card. It
would reduce payment fees often occurred in these platforms, So
again another big opportunity here to really shift into the
next phase of how crypto adoption is going to take place.

(13:47):
You take all of that and then you apply this
to the Clarity Act and whether or not the Clarity
Act is going to be a catalyst for crypto in general.
We put out a poll simply asking what would it
help more bitcoin orypto in general. Crypto in general was
pretty much the winner, hands down. That's the point we're
getting at here is watching these early liquidity moves, looking

(14:08):
at the global macro of what's happening around the world,
Where is that money going to come from, how is
stable going is going to be evolved, and where the
FED is going to start pulling the trigger and begin
quantitative easing. We believe it's somewhere in the early parts
of twenty twenty six.

Speaker 2 (14:24):
Watch very closely.

Speaker 1 (14:25):
Make sure if you're not subscribed to the channel, do
that right now. Get in on our free member group,
which is the Baron Market Edge. Very easy to join.
Click the link down below, follow me on x at
Paul Baron. We'll catch you next time right here on
the Paul Baron Show.

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