On September 19, the Federal Reserve cut interest rates by 50 basis points, the first time in four years that the Federal Reserve has cut interest rates. U.S. stocks and Bitcoin rose on the news, and the various crypto sectors also saw a long-awaited rebound.
Stimulated by macro policies, can the crypto market end its "long" period of volatility and rise again?
As we enter a cycle of interest rate cuts, what is the best investment strategy at present?
The short-term strategy is more conservative. There is no catalyst before the election. The overall market may have a clear direction after the interest rate cut in November and the election. Beta assets mainly depend on the election; there is no obvious improvement in the liquidity of the altcoin market, and the structural problems of the altcoins have not been solved; the core promoters of Memecoin are also facing some problems, and there may be fewer high-quality opportunities than before, and subsequent economic data and elections are needed to bring some breakthroughs.
Liquidity transmission is a process, and the funds brought by the interest rate cut will not enter the crypto market on a large scale at the first time. On the one hand, compared with the traditional financial market, the scale of the crypto market is still relatively small, the capital capacity is limited, and it is more risky. It takes time for the interest rate cut to take effect, and after it takes effect, it will spill over into the larger market, and ultimately leave the crypto market.
In this case, if BTC cannot achieve a breakthrough, Alts will be even less optimistic. Therefore, despite the continued rise of BTC.D, the BTC-based strategy still has configuration significance. On this basis, investing small-scale funds in some hot tracks (such as Meme) is a better combination.
The long-term interest rate cut process will gradually bring liquidity back to the risky market. The best investment strategy should be to remain rational and calm and avoid over-selling valuable assets.
Which sectors should we focus on after the interest rate cut?
If more liquidity can be injected into the market, then some high-quality assets whose prices are significantly lower than the expectations of industry promoters, AI and DePIN projects with excellent fundamentals and growth potential, and some ecosystems that are ready to go, such as Base, ZKsync, etc., are all worthy of attention.
The interest rate cut itself will bring more capital attention to Ethereum and the staking ecosystem, which have interest-bearing properties. Among them, assets such as Etherfi and Eigen are good targets. For RWA, the largest private credit market at present, due to the decline in financing costs and the increase in demand for high-yield products, it is also likely to drive the dual growth of supply and demand, bringing about further expansion of the RWA market size.
If a project or a track hopes for "sufficient buying brought by the bull market" or "sufficient liquidity brought by interest rate cuts", then it is very likely that its business itself is invalid or worthless. The strong will always be strong, and the weak will always be weak.
All kinds of Alt-coins may finally, probably, have reached the moment of “unwinding”. Retail investors who have been troubled by various high FDV models in the past year can now find opportunities to reduce their positions at highs. Less loss is more win.
How do you view the subsequent Federal Reserve policies and crypto market trends?
In the short term, we can look at the data from Polymarket. The market generally believes that the rate cuts will continue at a pace of 25bp in November and December. However, the unemployment rate and other data are actually improving. Such contradictions may be reflected in the subsequent rate cut decisions, causing some shocks to the market. In the long term, it is more necessary to answer the question of what the economic situation is to judge the trend of risky assets including crypto assets.
Although there are great differences and variables in the Federal Reserve's policy on the extent and pace of interest rate cuts, overall the path of interest rate cuts is relatively clear, and interest rates will be cut slowly over a longer period of time until the policy goals are achieved.
Looking back at previous historical data, BTC’s super bull market will have to wait until the US economy enters an overheating cycle and copper futures go bullish.
It can only be said that interest rate cuts usually increase market liquidity, which is a positive signal for the crypto market. However, the market's expectations for interest rate cuts may have been reflected in current prices, so the actual interest rate cut decision may have limited short-term impact on the market.
The liquidity released by the interest rate cut may not have spread to the chain yet. However, even if we put aside factors such as the Fed's interest rate cut and the US election, we can still expect BTC to have a better performance in the fourth quarter.
