What should we do about the Federal Reserve's interest rate cut, go long or short? It depends on the actual situation after the cut.
If the rate cut meets market expectations, risk assets like stocks, cryptocurrencies, and gold usually strengthen, and non-US currencies also benefit, while the dollar and US Treasury yields are under pressure. However, if the rate cut is less than expected, or if the Federal Reserve sends a hawkish signal, the results may be completely opposite—these assets may weaken instead.
It gets trickier with an unexpected rate cut. This often indicates increased risks of economic recession. In the short term, the bond market and gold might be favored due to risk-averse sentiment, but in the long run, recession expectations could weigh on high-risk assets like the stock market and cryptocurrency market.
Back to the present: In December 2025, the Federal Reserve did cut rates by 25 basis points, which was in line with expectations. However, the information revealed by the dot plot is more crucial—plans to cut by only 25 basis points each year from 2026 to 2027 show a noticeable slowdown in pace. This indicates that the extent of liquidity easing is limited, and the market is likely to enter a volatile pattern, with little room for favorable conditions in a one-sided market. $BTC #美联储降息
