Let us first try to understand why Bitcoin suddenly rebounded.
Yes, it has nothing to do with the debate between Trump and Harris, the governing theories of the two presidential candidates and Wall Street’s trading positions on the two, whether CZ is coming back, or whether Coinbase has been cleared of securities trading charges.
Simply because the market suddenly felt a breeze and almost all communities were speculating that there might be a 50 basis point rate cut next week.
Investors are increasingly betting on a 50 basis point rate cut next week, and in today's data, we can even see that the bets on both sides are close to 50:50.
Stimulated by such hype news, gold has taken the lead and set a new high. The US dollar index, which is closely linked to gold, has also continued to decline. This all implies that the market has begun trading "the Federal Reserve will cut interest rates by 50 basis points next week."
Therefore, regardless of whether the Federal Reserve will really cut interest rates by 50 basis points next week, gold has already risen, and our "digital gold" and Bitcoin will naturally not lag behind and begin to rebound. This is what is meant to be.
1. Will there really be a 50 basis point cut next week?
We can look at a very important indicator that reflects interest rates, which is the U.S. Treasury yield.
Retail investors may not be familiar with the US Treasury bond interest rate indicator. We don’t need to worry about the complicated theory.
I will teach you a very simple method, which is that you can regard the three-month U.S. Treasury bond rate as the forward futures indicator of the Federal Reserve's interest rate corridor. To be more approximate, you can vaguely assume that three months later, the market believes that the U.S. Treasury bond yield will be approximately equal to the Federal Reserve interest rate.
From the figure we can see that
The market is betting that the Fed's interest rate will reach 4.9 in the next three months. The current interest rate is 5.25, which is 35 basis points away from 4.9, which is exactly the middle value of 25 basis points and 50 basis points.
That's exactly in line with the rate at which investors betting on the market are betting.
The market doesn't know whether it will drop by 50 basis points.
In his opinion, the probability of a 50 basis point cut and a 25 basis point cut is 50% each.
So what does this mean?
If the Fed cuts interest rates by 25 basis points next week, it will be a direct negative for US stocks, US bonds, and especially for the US dollar.
Don't hesitate at all.
Second, a 25 basis point reduction makes sense, and a 50 basis point reduction also makes sense!
When no one knew how the Fed would decide, we knew that the ECB had already cut interest rates by 25 basis points as planned and technically adjusted the interest rate corridor. The ECB once again emphasized that the economy has downside risks.
The ECB is relatively honest, in other words, its actions are consistent with its words. In the global capital market, there is a place in the East and the West that is famous for its inconsistent words and deeds.
Therefore, we can refer to the actions of the European Central Bank. Although the interest rate cut this time is limited, there will inevitably be more interest rate cuts before the New Year, especially starting next year, the pace of interest rate cuts will accelerate.
What does this tell us?
In the grand chess game of liquidity expansion, the European masters have already taken a step ahead. Even if the Federal Reserve and the University of the South China Sea are hesitant and reluctant, they will inevitably take this step.
Therefore, no matter whether the Federal Reserve cuts interest rates by 25 BP or 50 BP in the short term, the extent of its interest rate cut will not be less than 75 BP before the end of this year, and will be even greater next year.
This means that in 2025, we will usher in a real tide of liquidity growth.
3. For cryptocurrency, all value is based on liquidity!
So why is September a disaster month? It is because September is the month with the worst liquidity in the US dollar. There are historical reasons, current US tax filings, and US consumer habits.
Therefore, the current wave of Bitcoin rebound is based on the fact that the market is trading on the fact that "the Federal Reserve will cut interest rates by 50 basis points next week."
Therefore, if the interest rate is cut by 25 basis points, it will definitely be bad news.
If the interest rate cut is 50 basis points, then when the cut is implemented, everyone will trade on the "logic of US market recession", which is still bad news.
Before the rate cut, the higher it went, the harder it fell after the rate cut. Now it is moving slowly from 58,000 to 60,000, and it has been hovering at this level for two days, which is actually quite healthy.
Deep down in my heart, I still look forward to the final dramatic plunge of the pie, which will give me the opportunity to enter the market again.
Of course, before that, between 49,000 and 58,000, I had about 40% of my positions, so I was not afraid of missing out.
But I sincerely hope that I can buy a full position and enter the exciting bull market in 2025.
I waited cautiously and expectantly.
