The matter of interest rate cuts is hopeless; the market's previous fantasy of liquidity easing is likely to be completely shattered.
As soon as the latest CME data came out, the probability of a rate cut in January dropped directly to 19.9%, and the probability of maintaining the interest rate in March surprisingly rose to 44.7%. Before, the market was betting hard that the Federal Reserve would loosen policy in the spring, but now, with this cold data, the Federal Reserve has directly shattered that fantasy.
Did you think an interest rate cut was a sure thing? It now seems like it could be a trap.
Last week, the market thought there was a 31% chance of a rate cut; just a few days later, expectations were halved. This is not just a simple change in data; the Federal Reserve is cooling market sentiment, and one could even say they are being quite ruthless. Too many people borrowed heavily to bet on easing, and now that interest rates are likely to be maintained for longer, these individuals are in for trouble, which could trigger wave after wave of sell-offs. When the Bitcoin ETF was approved, the market was so crazy; it now appears that was the last frenzy before liquidity reverses.
We need to think in reverse: what is the Federal Reserve really worried about?
Is inflation really controllable? Or is the economy actually hotter than the data reflects?
If expectations for rate cuts are completely gone, those heavily leveraged in cryptocurrencies will surely be the first to suffer. Especially during the two Federal Reserve meetings in January and March 2024, it will absolutely be a critical moment for both bulls and bears. The more consistent the market expectations, the more severe the reversal will be.
Here are some suggestions for players:
Don't borrow money to leverage; first, ensure your survival. Don't rush to place heavy bets before the interest rate decision, especially don't use high multiple contracts; the risk is too great.
Keep a close eye on the cash flow situation of Bitcoin spot ETFs. If money is tight in the U.S. stock market and fewer people are applying for the ETF, then the cryptocurrency market will certainly be affected.
Keep some cash on hand; when the market panic-sells due to "no chance of rate cuts," buy those quality assets in batches.
Remember, the Federal Reserve is not here to save the market; it is here to burst bubbles. In times of high interest rates, cash is your most reliable "weapon."
