The Federal Reserve cut interest rates. This morning, the benchmark interest rate was lowered by 0.5% (2 yards) to 4.75% to 5%, launching the first rate cut since 2020. The currency market then started to rise, with Bitcoin breaking through $62,000, Ethereum breaking through $2,400, and altcoins also performing well.

Generally speaking, interest rate cuts will be beneficial to risky assets. As time goes by and interest rate cuts continue, market liquidity will pour into the stock market and currency market.

However, looking back at history, when the Federal Reserve launched its first interest rate cut in many years in September 2019, Bitcoin did not rise in the short term, but fell 13.54% that month, from $10,000 to around $8,300, because it was a rapid interest rate cut to save the economic recession.

The following figure is a comparison of the S&P 500 index and the US benchmark interest rate since 1980. It can be found that the index fell along with the interest rate during the 2020 COVID-19 pandemic, the 2008 financial tsunami, and the 2000 Internet bubble.

Such performance is because the Fed started to cut interest rates at that time, and there were more serious economic problems, forcing the Fed to release money, which is not good news for the investment market.

Why did the Fed cut interest rates by 2 basis points this time?

Chairman Powell emphasized that this is a preventive measure aimed at maintaining the stability of the economy and the labor market. It does not mean that a recession is approaching or that the job market may collapse, which reduces market concerns about a recession and increases the possibility of a soft landing. (If a soft landing is successful, it will be good news for global venture capital)

In addition, from the perspective of market data, although the net inflow of Bitcoin spot ETFs has slowed down, it is still positive. The total market value of USDT has increased from US$104.7 billion in April this year to the current US$118.7 billion, and the market value of USDC has increased from US$34.4 billion at the end of August to US$35.5 billion. These data also show that over-the-counter funds continue to enter the currency market.

In addition, the currency market will also have seasonal trends. It usually performs poorly in the summer, but it will perform well at the end of the year and the beginning of the year. In the past 9 years, Bitcoin has performed strongly from 2015 to 2023, except for the bear market in October 2018. History may repeat itself before the end of this year. #美联储宣布降息50个基点 #加密市场反弹