QCP: Market Interprets Quantitative Tightening Plan Contraction as Indirect Rate Cut, Options Market Shifts Back to Call Options

March 20th: QCP disclosed its daily market observation, indicating that during last night's FOMC meeting, a long-awaited upward impetus was brought to the market, driving the price of Bitcoin above $85,000 with a substantial increase. The Federal Reserve decided to commence scaling back its "quantitative tightening" plan starting from April. The market interpreted this as an indirect rate cut, reinforcing the expectation that the Fed will initiate its easing policy as early as June. At the time of drafting this article, the market anticipates three rate cuts in 2025, which are scheduled for June, September, and December. Apart from the current exuberance, the Fed's tone was notably prudent. Policy makers adjusted their economic growth forecast downward to 1.7% (a 0.4 percentage point reduction) while raising the inflation forecast to 2.8%, suggesting an increasing risk of stagflation. Additionally, the Fed's dot plot showed a more hawkish shift compared to December of last year, with four officials now anticipating no rate cut in 2025. In the options market, the positioning has returned to normal, and the skewness has shifted back towards call options. This is in sharp contrast to earlier this week when the skewness favored put options. The key test will now occur tonight at the opening of the U.S. market.