Affected by the first monthly decline in the U.S. consumer price index and the assassination of Trump, the price of Bitcoin has climbed from $56,000 last week to over $62,000. The prices of other cryptocurrencies have also risen. The price of Ethereum has risen above $3,300, and its weekly increase is more prominent than that of Bitcoin. This is a reflection of the Ethereum spot ETF that will be listed soon. Small and medium-sized coins have also generally made up for the increase, all of which are affected by the positive effects of interest rate cuts.

First of all, the German government's sale of confiscated Bitcoin assets has been a headache for investors in the past two weeks. This matter has come to an end because the most stressful moment has passed. Last week, they sold nearly 35,000 BTC through exchanges such as Coinbase, Bitstamp, and Kraken. The current wallet balance is almost zero. As the influence of the German government dissipates, Bitcoin selling pressure will weaken.

This has also been reflected in the price. The rise of Bitcoin is affected by the continuous entry of funds to buy at the bottom. In addition, the share price of MicroStrategy, a "Bitcoin-like spot ETF", also rose a lot last week because the company decided to imitate technology stocks such as Nvidia and Broadcom and announced a 10-for-1 stock split.

Currently, the stock price of MSTR is close to $1,400. After the split, each share will be worth only about $140, which will allow more small shareholders to buy MicroStrategy shares with greater flexibility. Currently, the Bitcoin series of stocks still have a certain appeal to Wall Street investors.

With the end of the German government's sell-off, the remaining inventory will not have much impact on the market. What remains is the actual impact on the market after Mt Gox repays its debts. The market has already reacted emotionally to a wave of sell-offs. It depends on whether Mt Gox creditors will sell all the Bitcoins after receiving them, or whether the scale is smaller than expected. In the latter case, Bitcoin will currently be a good entry price.

Considering that the listing of Ethereum spot ETF in mid-July will bring a wave of capital buying, and the Fed will cut interest rates by one basis point in September, these two positive factors are expected to drive another wave of increases. Although the market is only rising slowly at present, there is still room for imagination in the subsequent increase. As for the probability of a rate cut, it is almost certain after the announcement of the consumer price index CPI.

The interest rate will be cut by one basis point in September, and the cryptocurrency market will be the biggest beneficiary

The price index in June is important news. It is not only the first time that the price index has dropped by 0.1% monthly, but also the core price index (excluding energy and food) has slowed down from a monthly increase of 0.2% to 0.1% for the first time. Among them, the rent index also The monthly growth rate dropped to 0.1%, which almost confirms that the inflationary pressure in the United States has reached a plateau and there is no longer significant pressure for growth. Although prices are still high, there is almost no motivation to continue to rise.

This information also tells the Federal Reserve: In order to prevent the US economy from falling into recession, the benchmark interest rate can be moderately lowered by one basis point. This "preventive rate cut" currently seems to have a high probability of happening. Although the US economy is still strong, a perfect soft landing will not allow the US economy to have any room for decline. Therefore, a one-basis rate cut to boost GDP growth to a flat level is a very likely move. However, economists are unable to determine whether the American people will have a change in their expectations if the interest rate is really cut, causing inflation to return.

However, U.S. technology stocks have already taken the "interest rate cut effect" into account in their prices. Investors can see that stock prices have hit new highs because large technology stocks have sufficient cash and multiple financing channels to withstand the high interest rate environment. In order to avoid risks and earn returns after the interest rate cut, funds will flow into large stocks. Small stock prices are actually still at a low point. However, now that the interest rate cut has been confirmed, funds have flowed to cheap small and medium-sized stocks, which has led to a drop in the prices of large stocks.

Therefore, we can see that the interest rate cut signal cannot attract too much new capital to enter. Investors have already placed most of their funds in the stock market. Now the stock market is just the result of capital flow, but the situation in the crypto market is different. It is expected that the cryptocurrency market will gain greater benefits than the stock market in the interest rate cut cycle, and the net capital inflow generated will be more. The main reason is that cryptocurrencies have the ability to attract more capital inflows through the reason of interest rate cuts.

Previously, the entire cryptocurrency market had lost a lot of funds due to the sell-offs by Mt Gox and the German government, which was also the main reason why the price of Bitcoin fell from US$70,000 to US$57,000. However, these investors who sold their funds did not leave the crypto market, and their funds are still parked in stablecoins. This can be judged from the continued stable growth in the market value of stablecoins. Therefore, it is expected that after the Fed starts to cut interest rates, these funds will flow back to the crypto market.

Considering that the German government's Bitcoin wallet balance is almost gone and the emotional selling pressure of Mt Gox has been almost digested, the on-chain analysis reports of various institutions also pointed out that the market selling pressure is fading and a Coinbase premium has appeared. Retail investors are buying at low prices. The future of cryptocurrencies will not be too bad in the medium and long term. After the listing of Ethereum spot ETF in July this year and the one-basis rate cut in September, the cryptocurrency market will be expected to challenge its previous glory again. The target price of Bitcoin is still US$70,000.

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