#美联储降息预期升温# #Gate广场创作点亮中秋# A Brief Analysis of the Federal Reserve's Rate Cut: Magnitude, Impact, and Market Signals

The highly anticipated Federal Reserve's September interest rate meeting is about to be held, and a rate cut has become a foregone conclusion, but there are still some uncertainties. As a participant closely monitoring the linkage between the macro and cryptocurrency markets, I would like to share the following points of view:

1️⃣ My view on the extent of this rate cut: 25 basis points as the benchmark, 50 basis points would be an unexpected delight.

The market has currently priced in almost the entire possibility of a 25 basis point rate cut. This aligns with the Federal Reserve's consistent tone of "data dependence" and "caution" aimed at addressing signs of slowing economic growth while avoiding excessive stimulation of inflation rebound. Therefore, a 25 basis point cut is the baseline scenario.

However, is it not possible to exclude the chance of a 50 basis point cut? Theoretically, it exists, but the probability is extremely low. Unless the Federal Reserve holds key data unknown to the market that indicates the economy is about to decline rapidly, a one-time cut of 50 basis points would send too much of a panic signal, which contradicts the "steady" image the Federal Reserve has been trying to maintain recently. If it really happens, it will be interpreted by the market as super dovish, and risk assets will welcome a huge celebration. But investors should not take this as a baseline prediction.

2️⃣ Prediction of the short-term impact of interest rate cuts on the crypto market: Positive, but needs to distinguish between primary and secondary effects.

Interest rate cuts benefit the crypto market through two core channels:

· Improved liquidity expectations: The interest rate cut has reduced the risk-free rate, decreasing the opportunity cost of holding non-yielding cryptocurrencies (as well as assets like gold). More yield-seeking capital may flow into the crypto market.
· Increased risk appetite: Interest rate cuts are generally seen as support for the economy and risk assets, boosting investor confidence.

The impact on specific cryptocurrencies may vary slightly:

· Bitcoin ( #BTC# ): As the "digital gold" and the leader of the cryptocurrency market, it will be the most direct and core beneficiary. Liquidity easing and demand for safe-haven/inflation resistance will first focus on it. Short-term prices are expected to break through the recent range of fluctuations and test resistance levels upwards.
· Ethereum ( #ETH# ): Also benefits from the macro environment. However, its price performance may also need to factor in considerations such as its own ecological development and ETF capital flows. The degree of positive influence may lag slightly behind Bitcoin, but the direction is consistent.
· Altcoins: The market may show divergence. Mainstream and high market cap altcoins will closely follow the movements of BTC/ETH. However, smaller market cap altcoins will experience greater volatility. Once the market confirms a bullish atmosphere, the risk appetite for funds will sharply increase, and altcoins may usher in an explosive rebound ("Altcoin Season"). However, in the short term immediately after the interest rate cut decision is announced, funds may prioritize inflow into more core assets.

The key variable lies in the Federal Reserve's "dot plot" and Powell's statements. If it suggests that this is just the beginning of a rate-cutting cycle (dovish), the market rally will continue; if it emphasizes that this is merely a "mid-term adjustment" rather than the start of a prolonged rate-cutting cycle (hawkish), then the market may "sell the fact" and experience short-term profit-taking.

3️⃣ Combining past cases: Will this be the ignition point for a new round of market trends?

Looking back at 2019, after the Federal Reserve cut interest rates by 25 basis points for the first time on July 31, Bitcoin reacted mildly in the short term, even experiencing a slight decline ("selling the news"). However, it subsequently entered a months-long upward trend, soaring from around $9,000 to approximately $10,500 in February 2020. The easing environment provided by the rate cut laid a solid foundation for the subsequent rise.

This situation is similar to that: the market has fully anticipated it. Therefore, a simple 25 basis point rate cut may not immediately trigger a market reaction; it requires subsequent statements and data to align.

However, I believe that this interest rate cut is more likely to be a "confirmation signal" rather than a "trigger signal." It confirms the trend of monetary policy shifts by the world's most important central banks, providing the market with expectations of long-term liquidity easing. This undoubtedly creates an extremely fertile macro environment for the medium to long-term bull market in the crypto market. The market may not soar immediately after the announcement, but it significantly increases the future upward potential while reducing the risk of a substantial decline.

To summarize my point: a 25 basis point rate cut is in line with expectations, and the focus is on the Federal Reserve's guidance. In the short term, this is generally positive for the crypto market, with BTC leading the way. This may not be the moment of an explosive market, but it is likely to be an important catalyst and support cornerstone for the next significant upward trend.