The Federal Reserve announced on the 18th that it would lower the target range of the federal funds rate by 50 basis points to a level between 4.75% and 5.00%. This is also the first time the Fed has cut interest rates in 4 years. The Fed cut interest rates by 50BP and started a rate cut cycle! ! The impact of rate cuts on BTC in the currency circle:

1. Increased liquidity and capital inflows into the crypto market

Rate cuts usually mean loose monetary policies, which reduce borrowing costs and increase liquidity in the market. For high-risk assets, such as cryptocurrencies, investors may be more willing to seek high returns when liquidity is abundant. Therefore, rate cuts are likely to drive more funds into the crypto market, especially major assets such as Bitcoin.

2. Weaker US dollar drives alternative assets such as Bitcoin

Rate cuts often lead to a weaker US dollar, causing investors to look for other safe-haven assets or hedging tools. Bitcoin is often regarded as a digital gold due to its limited supply and decentralized nature. Therefore, a depreciation of the US dollar may increase demand for digital currencies such as Bitcoin, further driving up their prices.

3. Increased risk appetite, encouraging more funds to enter altcoins

Rate cuts usually increase the market's risk appetite, and investors may be more willing to enter volatile markets, such as small-cap cryptocurrencies (altcoins). This may lead to a sharp rise in meme coins or emerging projects in the short term.

4. Market sentiment improves, driving bullish sentiment

Rate cuts are often seen as a supportive policy signal for the economy, easing market concerns about a recession and boosting investor confidence. In the cryptocurrency world, optimism can easily drive the entire market to a positive direction, which may lead Bitcoin and other mainstream crypto assets into a new round of rising cycles.

5. Increased attractiveness to institutional investors

Rate cuts may reduce returns in traditional financial markets and attract more institutional funds to enter the higher-yielding crypto market. With more institutional investors entering the market, market stability may be enhanced, driving a longer-term bull market.

6. May lead to greater volatility in the short term

Although rate cuts are beneficial to the market trend in the long run, in the short term, the market's interpretation of rate cuts may bring volatility. Traders may react quickly to policy adjustments, leading to sharp price fluctuations. #美联储宣布降息50个基点 #ETHBTC汇率新低