The Federal Reserve announced a 50 basis point rate cut in September, which was basically in line with market expectations. The 75 basis point cut urged by the senators did not happen. Federal Reserve Chairman Powell stressed that policymakers are not in a hurry to cut interest rates significantly. Bitcoin once broke through $62,000 on Thursday (September 19), and then fell back slightly. Analysts warned that they should be cautious of short-term volatility.
Massachusetts Senator Elizabeth Warren, Rhode Island Senator Sheldon Whitehouse and Colorado Senator John Hickenlooper on Monday called on the Fed to cut interest rates by 75 basis points this week. The letter stressed that Powell's delay has threatened the economy and believed that the current monetary policy is too cautious.
But in the end, the Federal Reserve decided to cut interest rates by 50 basis points, and no "black swan" event occurred.
Bitcoin surged in the short term, and future trading signals attracted attention.
Against the backdrop of Bitcoin's rise, according to CoinGlass data, in the past 24 hours, the total amount of cryptocurrency contracts liquidated reached US$186 million, of which US$110 million of short positions accounted for the majority, and a total of more than 67,000 people were liquidated.
But it seems that the margin call data on Thursday morning Beijing time is not particularly serious. Investors seem to have already taken risk in advance, or their liquidation price has not yet been reached. We must be cautious in the future as volatility may be further amplified.
Analysts at QCP Capital in Singapore expect the Fed's decision on Wednesday to have a significant impact on financial markets. In particular, they predict that short-term volatility will increase after the sharp rate cut.
“We believe volatility will be high in the days following the meeting as traders reposition for the coming weeks, and the regime change could also signal the start of a strong macro trend,” QCP noted.
While strategists expect bitcoin prices to weaken in the short term, they urge investors to focus on the long-term trend.
“While dips and high volatility are expected, don’t let it get in the way of Bitcoin’s upward price path, we favor a long-term structure with unlimited upside to take advantage of a potential parabolic rally in Bitcoin’s price,” the QCP analyst continued.
According to Chris Aruliah, head of institutional business at Bybit, the Federal Reserve’s 50 basis point rate cut could prompt funds to flow from banks to the stock market and increase investment in high-risk assets including cryptocurrencies.
As lower interest rates reduce returns on traditional investment vehicles, investors may turn to cryptocurrencies to diversify their portfolio risks.
“However, the global economic slowdown, weak economic indicators and geopolitical uncertainties still weigh on investor sentiment. While rate cuts may be positive for the crypto market in the short term, investors need to remain vigilant amid the current volatility,” he stressed.
The Fed's first rate cut in four years is aimed at easing pressure on the U.S. economy and helping the world's largest economy remain healthy. Interest rates affect a wide range of economic aspects, including the cost of borrowing to finance business operations. With lower interest rates, companies may be more inclined to borrow faster and explore more hiring and production activities.
In addition, consumers may be more inclined to increase credit spending, both because it is slightly easier to get a bank loan and because the return on saving money is slightly lower than the return on spending money. In this way, the Fed can discourage consumers from actively saving more money by lowering the return on savings, thereby injecting more money into the domestic economy.
As the central bank of the United States, the Federal Reserve has a dual mission: to control domestic inflation using a variety of policy tools while maintaining stable employment in the United States. Since lower interest rates tend to have an immediate inflationary effect, the Federal Reserve needs to carefully consider the speed and extent of raising or lowering interest rates. The September rate cut means that the Federal Reserve believes that it has successfully controlled US consumer inflation and expects that overall price growth data will continue to fall back to the Federal Reserve's internal target of 2% annual inflation.
U.S. employment data also plays a role in the Federal Reserve's interest rate decisions because a reference rate that is too high for too long could depress business activity to the point where mass layoffs could bog down the economy, increasing the likelihood of a recession.
With the dust finally settling on the Fed's first rate cut in four years, investors will immediately turn to speculation about whether the Fed will cut rates again when it meets again on November 7 to announce its rate decision. It is too early to tell what the Fed's next move will be, and policymakers will want to wait for the next few batches of economic data before making any decisions in less than two months.
CoinGape warns that any tough talk could dampen investor sentiment as the Fed hints at another 50 basis point rate cut in the remaining two Fed meetings. Still, based on historical trends, some market experts expect volatility in the market following a rate cut decision. With this in mind, investors are advised to perform due diligence when trading Bitcoin.
