After four years of waiting, the U.S. Federal Reserve announced its first interest rate cut of 50 basis points at its morning meeting today. The announcement of this decision has injected new vitality into the long-sluggish cryptocurrency market.

Bitcoin surged from a high of $58,000 to over $62,000, with the premium of the Bitcoin delivery contract at the end of the year being nearly $1,600, fully demonstrating a strong bullish signal!

The last time the Fed cut interest rates by 50 basis points was in March 2020, when it cut interest rates by 1 percentage point to 0-0.25% in response to the COVID-19 pandemic. Since March 2022, the Fed has launched an almost unprecedented round of aggressive interest rate hikes, and has maintained the policy rate at a high level of 5.25%-5.5% since July 2023.

After the interest rate cut in 2020, Bitcoin started to rise from the price range of US$4,000-6,000 after "3.12", and reached the high of the last bull market at US$69,040 in November 2021, with a maximum increase of more than 10 times. During the same period, the price of gold started to rise in the range of US$1,450 to US$1,700 in March, peaking ahead of Bitcoin, reaching a high of US$2,075 in August 2020 and then falling back. It bottomed out at US$1,616 in November 2022 and started a new round of increases until now.

After this rate cut, will the crypto market repeat history?

Rate cuts are likely to continue in the coming months

The Fed chose a combination of "dovish rate cuts + dovish dot plots + hawkish speeches"

The interest rate cut exceeded the market's expectation of 25 basis points and reached 50 basis points. At the press conference, Powell made it clear that the substantial interest rate cut does not mean that the US economy is about to fall into recession, nor does it indicate that the job market is about to collapse. On the contrary, the interest rate cut is a preventive measure aimed at maintaining the stability of the economy and the labor market.

The market generally expects that interest rates will continue to fall in the coming November and December. It is expected that there will be another 70 basis points of interest rate cuts this year. The published dot plot shows that there may be another 50 basis points of interest rate cuts this year.

The interest rate cut is a long-term positive for the risk asset market. Although the effect may not be immediately apparent in the short term, as time goes by and the interest rate cut policy continues to be implemented, market liquidity will gradually shift from traditional channels such as bonds and banks to emerging markets such as stocks and cryptocurrencies.

In addition, the upcoming U.S. presidential election in early November may also cause short-term volatility in the cryptocurrency market. After the election results are announced, funds that were originally on the sidelines may begin to flow into the cryptocurrency market.

BTC Spot ETF

As of September 18, the Bitcoin spot ETF has accumulated a total net inflow of 300,000 BTC.

When Bitcoin spot exchange-traded funds (ETFs) continue to receive inflows, the price of Bitcoin usually remains stable and shows an upward trend. On the contrary, if there is a large outflow of funds, the price of Bitcoin tends to continue to fall.

Currently, after a period of price fluctuations and declines, market confidence is gradually recovering and investors continue to actively buy Bitcoin.

The darkness before dawn has passed, and the starting point of a new round of tidal market has arrived

The Fed's 50 basis point rate cut this time indicates that it has obvious concerns about the current economic environment and needs to start a rate cut cycle with a larger scale. The global economy has recently faced liquidity challenges, and this rate cut decision has released new vitality for the global financial market.

As the "digital gold" of the new era, Bitcoin performed strongly against this backdrop, with a short-term breakout and a rise of $62,000. However, it is not just Bitcoin that benefits this time, as the entire crypto market is expected to usher in a new round of market conditions amid loose monetary policy.

It is important to note here that, unlike traditional markets, Bitcoin's performance is more affected by the liquidity of the U.S. dollar rather than changes in the U.S. economic outlook. This means that in the future loose monetary environment, Bitcoin may continue to be the preferred asset for investors to fight inflation and seek safe havens.

As the interest rate cut cycle continues, the crypto market may enter a longer upward channel. Market volatility still exists, but this round of cryptocurrency market may drive more funds and innovation into the field, pushing the entire crypto ecosystem into a new stage of development.

For the current market, under such a macro environment, the probability of another break is already very low. If the high point breaks through 70,000 again, it is very likely that the real main uptrend will start at any time. It has been fluctuating for more than half a year, and everything is possible.

The engine of the bull market cannot be seen only in Bitcoin. Only when Ethereum leads a group of small coins to make money can a spark start a prairie fire. Otherwise, it is just a Bitcoin bull market, and this bullish taste is accompanied by a hint of sadness. What is certain is that Bitcoin will definitely be bullish, while small coins need to wait for real liquidity to spill over.

Judging from the recent trend of small coins, in fact, many coins have come out of the bottom, and it can be basically confirmed that the bottom has been reached. After the first wave of this bottom, there will often be a retracement to confirm. The depth of the retracement depends on different tokens. Whether you dare to go up at that time will greatly affect the rate of return in the next six months to one year. After so long, I hope everyone can get satisfactory returns this year.