The Federal Reserve's meeting and Powell's statements did indeed signal a "hawkish rate cut" – while it began expanding its balance sheet (purchasing approximately $40 billion in short-term Treasury bonds monthly starting in December), the dot plot significantly lowered its expectation for rate cuts next year to only one, directly suppressing market optimism regarding the pace of easing. As a result, risk assets generally came under pressure, and the cryptocurrency market exhibited a typical "door-shaped" price action, with the battle between bulls and bears intensifying volatility under the influence of contracts.
1. Short-term policy path: There is a high probability that the current interest rate will be maintained at the January and March 2024 policy meetings. The key observation window for the next policy change will be the economic data in the first quarter of next year and the Fed's statement.
2. The divergence between balance sheet expansion and interest rate cuts: Although bond purchases have been initiated to expand the balance sheet, this is mainly to maintain market liquidity and avoid reserve shortages, and is not a signal of substantial easing. The core of monetary tightening—the balance sheet reduction process (QT)—is still ongoing.
3. Powell's tenure factor: Powell will step down in May 2024. His policies will remain consistent during his term, but the choice of the next chairman may affect the medium- to long-term monetary policy tone. The market may be re-evaluating expectations of a policy shift in the second half of the year.
• Cryptocurrency market characteristics: Current price movements are still dominated by derivative contracts, and retail investors are vulnerable to sharp price swings due to uncertainty about the direction. A tug-of-war between bulls and bears—between "reducing positions before rallies" and "buying the dip"—is causing prices to fluctuate repeatedly within a range.
External risk events: If the Bank of Japan raises interest rates on December 19, it may further boost the US dollar, compress global liquidity, and exacerbate short-term market correction pressures.
• Year-end liquidity contraction: Market participation typically declines between Christmas and New Year, and shrinking trading volume may amplify price volatility, but the start of a trend may have to wait for the macroeconomic situation to become clearer in the first quarter of next year.
• Position management: Consider gradually reducing some profitable positions when prices rise, and retain cash to wait for a clearer medium-term directional signal.
• Range trading: To capitalize on volatile market conditions, it is essential to strictly control leverage and set narrow stop-loss orders to avoid position risks caused by sudden fluctuations in the contract.
• Long-term strategy: A deep correction may provide opportunities to allocate to mainstream assets, but patience is needed to wait for the inflection point where market sentiment and the macro environment resonate.
The market is currently digesting the policy path of "later interest rate cuts and slower easing." It is recommended to adopt a defensive stance to deal with year-end volatility and retain flexibility to deal with possible repricing opportunities next year.
