The US will release the September CPI data at 8:30 tonight. The previous value was 2.5%, while the market expected it to be 2.3%. So, let's imagine that if the CPI data released tonight is 2.2%, will the Federal Reserve continue to cut interest rates by 50 basis points in November?
After the Fed's interest rate decision, the market currently expects a 25 basis point rate cut in November. However, the rate cut in September reached 50 basis points, which has broken the Fed's usual gradualism. Judging from the current inflation data, it does support a significant rate cut. So, will the Fed cut interest rates again? The answer will be revealed next month.
The impact of interest rate hikes on cryptocurrencies:
The Fed's rate cuts usually mean an increase in liquidity in the macroeconomic environment. When interest rates in traditional financial markets fall, investors may seek higher-yielding assets. The cryptocurrency market, due to its potential high-return characteristics, may attract some of the capital inflows that were originally in the traditional financial sector. For example, some investors with higher risk appetite may transfer funds from low-interest bonds or savings accounts to the cryptocurrency market, thereby driving up the price of cryptocurrencies.
This process is similar to the "profit-seeking behavior" of funds. In a low-interest environment, funds need to find investment channels that can achieve higher returns, and the volatility and potential high returns of the cryptocurrency market make it an option for some investors.
Improving market sentiment
Rate cuts are often seen as a stimulus to the economy, which can have a positive impact on market sentiment. This optimism could spread to the cryptocurrency market, boosting investor confidence. When investors are optimistic about the economic outlook, they are more likely to participate in various investment activities, including cryptocurrency investment.
For example, after the Federal Reserve announces a rate cut, traditional financial markets such as the stock market may rise, and this positive atmosphere may be transmitted to the cryptocurrency market, making investors have higher expectations for the future performance of cryptocurrencies. Improved market sentiment can encourage more people to participate in cryptocurrency trading, increasing market activity and liquidity.
Conclusion:
Bitcoin is often regarded by some as "digital gold", and its value storage properties may become more prominent during periods of economic instability or loose monetary policy. When the Federal Reserve cuts interest rates, people's confidence in traditional currencies may weaken, and Bitcoin's decentralization and scarcity may make it a safe-haven asset option.
Just as in traditional financial markets, gold tends to be favored by investors during periods of low interest rates and economic uncertainty, Bitcoin may also attract more attention and capital inflows in similar environments due to its unique properties.
