The Fed announced a 25 basis point rate cut, and the market initially hoped this would lead to a rebound, but the subsequent news caused a rapid cooling of sentiment: the Fed indicated that the number of rate cuts in 2025 will be significantly reduced, and interest rates may remain high, not as substantially cut as previously expected.
At the same time, Powell clearly stated that the Fed 'cannot hold Bitcoin', which caused a dramatic change in investor sentiment, causing Bitcoin to plummet from its historical high of $108,000, breaking below the $100,000 mark.
Is this decline just an episode in a bull market, or a true turning point in market trends? We can look at several aspects:
1. Fed policy and market response
2. Bitcoin's market analysis
3. The impact of short-term volatility on long-term trends? How to respond?
4. Key factors supporting the crypto market and potential risks
5. Where are the future opportunities?
I. Fed policy and market response: Why did market sentiment change so suddenly?
Last night, the Fed announced a 25 basis point rate cut. The market initially expected this news to lead to a rebound, but Powell's subsequent remarks caused a 180-degree shift in sentiment. He stated that while inflation has receded, the cooling rate is not as fast as expected, and the number of rate cuts is expected to be significantly reduced by 2025.
For risky assets like Bitcoin, high interest rates mean higher funding costs and greater investment risks. As a result, Bitcoin has rapidly fallen, cooling market sentiment. Furthermore, Powell responded to Trump's proposal to establish a Bitcoin reserve by clearly stating that the Fed cannot hold Bitcoin and has no intention of changing the existing legal framework. This news further exacerbated market uncertainty.
II. Bitcoin's market analysis
From a technical perspective, Bitcoin is now showing signs of a short-term adjustment, with overall bullish momentum beginning to weaken, forming a typical top divergence pattern. On the daily chart, a 'top formation' structure has also appeared, indicating that Bitcoin may face some downward pressure in the short term.
Additionally, on-chain data shows a decline in the number of active trading addresses, while the inflow of funds to exchanges is increasing, indicating that some investors are choosing to take profits at high levels. The risk aversion sentiment in the derivatives market is also rising, with demand for put options reaching a three-month high.
III. Does short-term volatility affect long-term trends? How to respond?
Although the Fed's policy has led to significant market fluctuations in the short term, Bitcoin has experienced similar fluctuations many times, each time finding new upward opportunities at key support levels. In fact, a 20% adjustment is quite common in a bull market, and a pullback is actually a good buying opportunity. Therefore, while prices are currently falling, the market's support remains strong in the long term.
Currently, market sentiment is quite panicked, and the options market also shows that investors are worried about Bitcoin's short-term decline. However, for investors, the most important thing is to remain calm. When facing market volatility, rational analysis and formulating clear trading strategies are key. This short-term adjustment actually provides investors with an opportunity to buy at a lower price. If you are a long-term bullish investor in Bitcoin, now is a good time to 'buy the dip'.
IV. Key factors supporting the crypto market and potential risks
Although the Fed's hawkish policy has led to increased market volatility, the long-term factors supporting Bitcoin still exist. First, the robust growth of the US economy and the gradual maturity of the crypto market provide a solid foundation for Bitcoin. Additionally, the entry of institutional investors has injected strong support into Bitcoin. Trump stated during his campaign that he would support cryptocurrencies and proposed a policy to establish a Bitcoin reserve, which is good news for the market. However, Powell's response reminds us that regulatory policies remain fraught with uncertainty, which cannot be ignored.
At the same time, the market also faces certain risks. The strength of the US dollar may put pressure on Bitcoin, as a rising dollar index means that Bitcoin priced in dollars may depreciate. In addition, while Trump's policies are favorable to the crypto market, they may also trigger new trade risks, further increasing market uncertainty.
5. Where are the future opportunities?
Despite the current market fluctuations, Bitcoin's long-term potential remains strong. With more and more institutions joining, and the regulatory landscape of the crypto industry gradually clarifying, the future of the market is full of opportunities.
For investors, this adjustment period may actually be a good time to observe and gradually enter the market. If the Fed's interest rate cut expectations continue to diminish in 2025, the market may gradually stabilize, and investors will have more opportunities.
VI. Summary
Overall, although the current market has experienced volatility due to the Fed's hawkish statements, from Bitcoin's fundamentals, this adjustment is likely just a normal fluctuation in a bull market. For those who are optimistic about Bitcoin's long-term potential, the current market decline may actually be a buying opportunity worth considering. Stay patient, analyze rationally, and future opportunities are still worth looking forward to!