Market expectations for a December rate cut by the Federal Reserve have soared to over 80%, but cracks are hidden beneath the celebration. On one hand, the divergence within the Federal Reserve regarding inflation and economic data is still widening; on the other hand, the compliance of stablecoins is quietly rewriting the rules of the U.S. Treasury market. For investors, opportunities and risks have never been so intertwined.
1. Interest Rate Cut Expectations: Beware of the Backlash of 'Good News Being Fully Priced In'
Although the market is generally betting on a rate cut in December, there is still no consensus within the Federal Reserve. The latest dot plot shows significant divergence among officials regarding the future path: there are doves supporting further rate cuts and hawks worried about inflation rebound. This policy uncertainty could lead to reversal pressure in the market after the rate cut, creating a 'buy the expectation, sell the fact' scenario.
Historical experience shows that after the first interest rate cut, funds often rotate from overvalued sectors to undervalued assets. If the S&P 500 cannot effectively break through the 6900-point resistance area, be cautious of the risk of a pullback triggered by collective profit-taking.
Two, stablecoins: The 'new leverage' in the U.S. Treasury market
(Genius Bill) After passing, compliant stablecoins must allocate 100% of reserves to U.S. Treasuries or cash equivalents. This rule makes stablecoin issuers important buyers in the U.S. Treasury market—currently, leading stablecoin issuers hold over $120 billion in U.S. Treasuries, equivalent to being the 19th largest holder of U.S. Treasuries globally.
The bidirectional impact of stablecoins on U.S. Treasuries:
Short-term support: The expansion of stablecoin supply provides new demand for U.S. Treasuries, especially alleviating selling pressure on short-term bonds;
Long-term risk: If stablecoins encounter large-scale redemptions, issuers may be forced to sell U.S. Treasuries to liquidate, triggering a chain reaction.
Three, operational thinking: Seek certainty amidst contradictory signals
Focus on capital rotation
If interest rate cuts are implemented, observe whether funds shift from technology stocks to small-cap stocks or value stocks. In cryptocurrencies, Bitcoin usually reacts to changes in liquidity ahead of altcoins.
Prevent volatility amplification
Before and after important events (such as the Federal Reserve's interest rate meeting on December 10 and Ethereum's upgrade on December 4), market volatility may surge. It is recommended to set up defensive plans for key points in advance, such as being alert for trend reversals if the S&P 500 falls below 6700 points.
Focus on compliant assets
Under the trend of stablecoin compliance, prioritize issuers with transparent reserves (such as USDC, FDUSD) and avoid varieties with questionable audits.
Four, core contradiction: The game between policy cycles and market confidence
The biggest hidden danger in the current market lies in the misalignment between the Federal Reserve's policy goals and economic data:
Inflation is still above the 2% target, but the job market has shown signs of fatigue;
Interest rate cuts are intended to stimulate the economy but may be interpreted by the market as a signal of recession.
In this contradiction, any data exceeding expectations may trigger severe fluctuations. Investors need to maintain flexible positions to avoid excessive exposure in a single direction.
The real risk is not the volatility itself, but ignorance of changes. At the nodes where policy and market resonate, it is more important to understand the underlying logic of rule reshaping than to chase trends.
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