On September 18, the Federal Reserve will hold a rate meeting. The long-awaited rate cut is finally about to begin. The Federal Reserve's rate cut is usually a major positive for risky assets and will bring huge liquidity to the market. However, Ebunker co-founder 0xTodd put forward a different point of view. He believes that the short-term effect of the rate cut may not be conducive to the short-term investment of crypto assets. BlockBeats reprinted the full text as follows:
I have an unverified idea: before a rate cut, especially the closer it gets to a rate cut, the more funds will be withdrawn from risky markets.
For example, regardless of the coupon rate, the yield on medium- and long-term US Treasury bonds has dropped from a peak of 4.5-5% to 3.5%-4% today. If the official announcement of a rate cut is made, or even a series of rate cuts begins, the actual yield will naturally go down, which will be reflected in the increase in the price of the bonds themselves.
(Possibly) there are some funds in the market thinking:
Now is probably the last window to increase holdings of U.S. Treasuries. You can lock in 4% of U.S. dollars for 10 or even 30 years, and the interest rate is still very attractive.
Then these funds can only withdraw from the risky market during this time window (August-September), causing the darkness before dawn in the market.
The interest rate cut is a milestone event. Before the rate cut, there was no sense of urgency, and everyone was thinking about continuing to make money in the risk market. When the rate cut was approaching, people began to have the mentality of "hurrying to catch the last bus".
Therefore, as the interest rate cut approaches, instead of the imagined price-in increase effect, we will feel that liquidity is constantly decreasing.
By the time the official announcement of the rate cut came, all the funds that were supposed to leave had already left. Those who stayed behind were obviously waiting for the party to begin.
PS: Of course, investors in the crypto market seem to have very different risk preferences from U.S. bond investors, and their user profiles may not match, so this is an unverified idea.
