Regarding the Federal Reserve's actions at the end of the year, the market sentiment has undergone an extremely drastic "180-degree turn" in the past 24 hours.
Many people see the rising probability of interest rate cuts and their first reaction is: "Good news! Let's go!"
But as cryptocurrency traders, if we only look at the surface level, we are not far from liquidation. Today, we will use the latest CME interest rate futures data (see chart) to deeply analyze the logic behind this "strange reversal" and its real impact on the crypto space.
💸 1. Extremely rare "single-day sentiment shift"
Please pay special attention to the 【Probability History】 at the bottom of the data chart:
• Just yesterday (1 Day Ago): Mainstream market funds (60.9%) were still betting on the Federal Reserve's inaction in December. At this time, overall sentiment was neutral to slightly hawkish.
• Today (Now): Just 24 hours later, the wind has completely reversed. The probability of betting on a 25 basis point rate cut has violently surged from 39% to 71%!
🤔 2. In-depth analysis: Why did it suddenly change?
In macro trading, this collective jump in direction, with billions of dollars wagered in a short period, is usually not because of 'good news', but because the market has sensed a **'bad odor'**.
If the economy is stable and improving, the Federal Reserve does not need to rush to cut interest rates. A sudden urgent expectation of rate cuts often indicates that macro data has shown cracks (such as worsening labor market or intensified recession signals), and the market begins to force the Federal Reserve to implement **'defensive rate cuts'** or even 'recession-style bailouts'.
This is not to let the market celebrate, but to prevent a hard landing for the economy.
📉 3. What does it mean for the cryptocurrency market?
Many beginners' linear thinking is: interest rate cuts = liquidity = Bitcoin rises.
But history tells us that in the early stage of **'recession trades'**, the logic is often cruel:
1. First stage (panic period): The market realizes that the economy is going to encounter problems, and in order to avoid risks, funds will first sell off the most liquid and volatile risk assets. Cryptocurrency is at the forefront.
2. Second stage (confirmation period): The Federal Reserve confirms interest rate cuts, and market sentiment gradually stabilizes.
3. Third stage (recovery period): The liquidity effect becomes apparent, and asset prices rebound.
We are currently at the end of the most unstable first stage.
💡 4. Operational suggestions
Looking at that towering 71% interest rate cut probability bar in the chart, do not see it as a call to charge in and go long immediately, but as an alarm that market volatility is about to increase.
In the current environment of extreme instability in macro narratives, high leverage is extremely dangerous. For spot players, the cost-performance ratio at the current position is not high; it is better to patiently wait for the market to digest this wave of 'recession panic' before confirming the Federal Reserve's attitude and then taking action.
Conclusion: Interest rate cuts may indeed stabilize, but the market may first be 'unstable' for a while. Protect the principal.
