Editor's note: On September 18, the Federal Reserve will hold an interest rate meeting. The long-awaited interest rate cut is finally about to begin. An interest rate cut by the Federal Reserve is usually a major positive for risk assets and will bring huge liquidity to the market. However, Ebunker co-founder 0xTodd put forward a different view. He believed that the short-term effect of interest rate cuts may not be conducive to short-term investment in crypto assets. BlockBeats reproduced the full text as follows:

I have an untested idea: Before a rate cut, especially the closer it is to a rate cut, funds from the risk market will be more heavily withdrawn.

For example, now, regardless of the coupon rate, the yield on medium- and long-term U.S. bonds has dropped from its peak of 4.5-5% to 3.5%-4% today. If an interest rate cut is officially announced, or even if continuous interest rate cuts begin, the actual yield will naturally go down, which will be reflected in the price of the bond itself rising.

The idea that (possibly) there is some money on the floor is:

Now is probably the last window to add to U.S. debt. The U.S. dollar is locked in at 4%, and it can be locked in for 10 or even 30 years. The interest rate is still very attractive.

Then these funds can only be stuck in this time window (August-September) and desperately withdraw from the risk market, causing darkness before dawn in the market.

The interest rate cut is a milestone event. Before the interest rate cut, there was no sense of urgency. They were all thinking about continuing to make money in the risk market. As the interest rate cut approaches, I begin to think of "hurrying up to catch the last bus."

Therefore, as interest rates are approaching, not only will the price in increase not have the expected effect, but we will feel that liquidity has been decreasing.

And by the time the official announcement of the interest rate cut begins, all the funds that should be gone have already gone. Those who stayed behind were obviously those waiting for the dance to start.

PS: Of course, the risk preferences of investors in the crypto market seem to be much different from those of U.S. bond investors, and user profiles may not match, so this is an unverified idea.

Encryption yihang comments:

Crypto KOL Daewoo’s point of view: The flow of funds is a point, and foreign exchange fluctuations are also a point. In addition, it takes a long time to match the investment, valuation and income of technology stocks. AI currently seems to be mainly stifled by dreams.

[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.

  • This article is reprinted with permission from: "Rhythm Blockbeats"

  • Original author: 0xTodd