As the Federal Reserve announced that it would slash its benchmark interest rate by half a percentage point, global financial markets reacted quickly, and the Bitcoin market, stimulated by the news, quickly hit a monthly high, with yesterday's closing price firmly above $61,783. Judging from the recent daily chart of Bitcoin, its upward trend is strong, which makes people wonder: Does this herald the arrival of a new round of bull market?
The logic behind the Fed’s decision to cut interest rates
Although the Fed's decision to cut interest rates had been rumored before, the extent of the cut still surprised the market. The jump from 25 basis points to 50 basis points shows the Fed's decisiveness and determination in dealing with the current economic environment. However, this radical move has also caused some experts to worry about rising inflation. As a result, the traditional asset market has been under certain pressure, while risky assets such as Bitcoin have shown a completely different optimism.
Positive reaction from the Bitcoin market
The Bitcoin market has performed well over the past 24 hours, with the price increasing by more than 2.9%. Bitcoin price has climbed steadily since the beginning of the month, gradually moving higher from a low of $58,977.11. Especially after September 7, despite occasional market fluctuations, the overall upward trend was obvious. Especially recently, Bitcoin has shown strong bullish signals for three consecutive days, with the price breaking through the $60,000 mark in one fell swoop, showing a significant recovery in market confidence.
Historical comparison of interest rate changes and Bitcoin prices
Looking back at history, the U.S. federal funds rate has experienced dramatic fluctuations in the past few years. Starting from a low of 0.25% on February 28, 2022, the interest rate soared to a high of 5.5% in less than a year and a half. This rate cut is the first rate cut by the Federal Reserve since March 2020, marking a new round of adjustments in monetary policy. It is worth noting that the interest rate cuts taken by the Federal Reserve in 2020 in response to the epidemic once sharply reduced the interest rate to 0.25%, injecting a lot of liquidity into the market. Today, can similar interest rate cuts bring new growth momentum to risky assets such as Bitcoin?
Future forecast: bull market or short-term fluctuations?
The Fed's new move has undoubtedly brought new opportunities to the risk asset market. As the best among them, cryptocurrencies such as Bitcoin have shown initial growth potential. However, to determine whether the current price increase marks the beginning of a new bull market, we need to further observe the subsequent performance of the market. After all, the financial market is changing rapidly, and any price fluctuation may be affected by a variety of factors. Therefore, while seizing opportunities, investors should also think rationally and carefully assess risks.
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