The Federal Reserve will hold a monetary policy meeting on the 17th and 18th, Eastern Time, and will announce the latest interest rate policy at around 2 a.m. on the 19th, Taiwan Time. At present, it seems that the start of the interest rate cut is a foregone conclusion. The key point is whether it will be reduced by 1 or 2 basis points at a time?
FedWatch data shows that the current market expectation is that the probability of a 1 basis point rate cut is 43%, and the probability of a 2 basis point rate cut rises to 57%. Usually, a rate cut is a major positive for risky assets such as Bitcoin, which will bring huge liquidity to the market; but many experts are also worried that if the rate cut is 2 basis points, the market will suspect that the US economy is in recession, and the pace of rate cuts will lag behind, leading to a sharp drop in the currency market, stock market, etc., and increased volatility.
Image source: FedWatch
At the same time, the US presidential election in November has also made the Federal Reserve's decision-making a focus of attention. Republican presidential candidate and former US President Trump recently warned that the Federal Reserve should not cut interest rates before the election. Democratic Senator Elizabeth Warren asked the Federal Reserve to cut interest rates by 3 basis points. If the interest rate is cut by more than 2 basis points at a time, Trump may criticize the Federal Reserve for helping the Democratic Party in the election.
In addition to interest rate decisions, investors and analysts will be paying close attention to two key points:
The “dot plot” in the Fed’s quarterly forecast updates, which shows where Fed members expect interest rates to go in the next few years and could deepen market recession expectations if it’s too aggressive;
Federal Reserve Chairman Powell’s press conference at 2:30 p.m., analyzing his remarks on future policies.
JPMorgan Chase CEO warns of recession risk
Jamie Dimon, CEO of JPMorgan Chase, recently warned that although people's confidence in easing inflation is increasing, he does not rule out the possibility of stagflation, that is, economic recession and rising inflation. He mentioned factors such as increased government spending and rising deficits, saying that although inflation data is improving, indicators such as employment and manufacturing show that the economy is in a state of tension:
Basically in the short term, inflation will continue for the next few years.
Jamie Dimon emphasized that despite some positive economic signals, there are still major uncertainties, and inflationary pressure may drag down the U.S. economy. He has been warning about the economic slowdown. He predicted last month that a soft landing of the U.S. economy may be possible. The ratio is only 35% to 40%, suggesting that the United States may enter an economic recession and mentioning uncertainties such as geopolitics, housing, and consumption.
JPMorgan Chase is the only major U.S. bank that insists that the Federal Reserve will cut interest rates by two basis points.
Last month, Ball hinted that if the unemployment rate rises, he would be open to a 2-point cut. If the Fed lags behind in cutting interest rates, the consequences will be disastrous. Former Fed Vice Chairman Alan Blinder once pointed out that in the history of the United States, the Fed has The Legislature has only once succeeded in achieving an apparent soft landing, in the mid-1990s, when high interest rates managed to curb inflation without tipping the economy into recession.
Bitcoin may experience large fluctuations
10x Research also pointed out recently that if the Fed decides to cut interest rates by 2 basis points this week, it may indicate that the Fed's concerns about the economy have intensified, or that the pace of interest rate cuts is lagging behind in responding to the impending economic slowdown, causing investors to reduce their exposure to risky assets such as Bitcoin and stocks.
Coinglass data shows that if Bitcoin rebounds and breaks through $62,000, the cumulative short order liquidation strength of mainstream centralized exchanges such as Binance, OKX, and Bybit will reach $1.6 billion. If Bitcoin falls below $57,000, the cumulative long order liquidation strength of mainstream centralized exchanges will reach $490 million, so the trend may fluctuate greatly in the future.
However, it should be noted that the liquidation chart does not show the exact number of contracts to be liquidated or the exact value of the contracts to be liquidated. The cylinders on the liquidation chart show the strength of each liquidation cluster relative to the adjacent liquidation clusters.
Therefore, the liquidation chart shows the extent to which the underlying price will be affected when it reaches a certain price. A higher liquidation cylinder means that after the price reaches that point, it will react more strongly due to the liquidity wave.
