The Federal Reserve is uncertain about interest rate cuts, what impact does it have on the crypto market?

The Federal Reserve's interest rates can be seen as the "price of global funds". When rates are high, money is expensive; high interest on savings and high costs for borrowing. When rates are low, money is cheap and liquidity is abundant. The crypto market, especially Bitcoin, is similar to "high-elasticity stocks", heavily reliant on the funding situation.

If a rate cut is certain, money becomes cheap, and some funds will flow into high-risk assets like Bitcoin and other cryptocurrencies, making them likely to rise; if interest rates increase or remain high, money becomes expensive, and large funds tend to buy U.S. Treasury bonds, leading to a "blood shortage" in the crypto market, weakening upward momentum.

In direct impact, many crypto players borrow low-interest dollars to trade cryptocurrencies; when rates are high and uncertain, the cost of leverage increases, weakening buying power, and institutional funds are likely to hesitate due to uncertainty.

When interest rates are uncertain, the crypto market, as a risk asset, often declines alongside U.S. stocks (especially tech stocks), with funds fleeing to safe-haven assets. However, if the uncertainty is due to stubborn inflation, Bitcoin's anti-inflation narrative may provide some support, but currently, it is more dominated by the characteristics of risk assets.

When the market is unsettled, funds first withdraw from high-risk altcoins (cryptocurrencies other than Bitcoin), which are highly volatile and carry high risks, often "falling first as a courtesy"; when Bitcoin is weak, altcoins usually decline even more.

In terms of specific volatility, when the Federal Reserve takes a hawkish stance (indicating no rate cuts or rate hikes), the market typically drops quickly; when it takes a dovish stance (indicating possible rate cuts), the market rebounds quickly; during back-and-forth swings, the market experiences wide fluctuations, and contract leverage players are prone to being liquidated.

In summary, the Federal Reserve's uncertainty is a short-term negative for the crypto market, suppressing upward momentum, bringing uncertainty, and amplifying emotional volatility. At this time, it's advisable to observe more and act less, avoid high leverage, and for those looking to dollar-cost average or have a long-term outlook, control positions and keep sufficient cash on hand. Remember, preserving capital is most important during volatile periods.

#美联储重启降息步伐 $BTC