Analysis of Expectations for Five Interest Rate Cuts by the Federal Reserve
There is significant divergence in current market predictions regarding the number of interest rate cuts by the Federal Reserve in 2025. Although economist surveys and the Federal Reserve's official dot plot show that the mainstream expectation is for two rate cuts this year (in September and December), Barclays has adjusted its prediction to only a 25 basis point cut in June, while some analysts believe there may be 2-3 cuts throughout the year. The uncertainty of economic policies under the Trump administration, especially potential tax cuts and trade tariffs, may further disrupt the Federal Reserve's decision-making path.
Federal Reserve Governor Waller has explicitly ruled out the possibility of a rate cut in March and emphasized the need to observe inflation data and employment market performance. If the U.S. economy remains resilient and inflationary pressures persist, the Federal Reserve may slow down the pace of interest rate cuts. However, if economic growth significantly slows or the employment market deteriorates, the number of rate cuts may increase to 3 times or more. This policy uncertainty has led to significant deviations in market expectations regarding “massive monetary easing.”
Possibility of Bitcoin Reaching New Highs Before June
The price trend of Bitcoin is highly related to the Federal Reserve's monetary policy. After the Federal Reserve lowered interest rates to zero and initiated quantitative easing in 2020, Bitcoin surged from $5,000 to $65,000, demonstrating the stimulating effect of interest rate cuts on the cryptocurrency market. However, the current market environment differs significantly from that of 2020:
Inflation and Monetary Policy: Although inflation in the U.S. is expected to decline in 2025, it will still be above the Federal Reserve's 2% target. If inflation remains high, the Federal Reserve may slow down the pace of interest rate cuts, limiting Bitcoin's upward potential.
Institutional Demand: The launch of a spot Bitcoin ETF provides institutional investors with a convenient investment channel, but the flow of ETF capital is not entirely positively correlated with Bitcoin prices. For example, after the Federal Reserve only cut rates by 25 basis points in December 2024, Bitcoin plummeted 4.6% in a single day, indicating that institutional investors are highly sensitive to policy signals.
Technical Factors: The price of Bitcoin is influenced by the halving event, historical patterns, and market sentiment. The halving event in April 2024 is theoretically expected to drive prices up, but the actual effect needs to be judged in conjunction with the macroeconomic environment.
Standard Chartered predicts that Bitcoin may reach $200,000 by the end of 2025, but this target requires meeting multiple conditions, such as the repeal of SAB-121 regulations, increased influence of Bitcoin ETFs, and rising inflation expectations. In the predictions of reaching new highs before June, it is important to focus on the decision-making trends of the Federal Reserve's May monetary policy meeting and the June FOMC meeting.
Driving Factors and Risks of Altcoin Season Outbreak
The outbreak of the altcoin market usually lags behind the Bitcoin bull market, but structural changes may occur in 2025:
Liquidity Cycle: If the Federal Reserve lowers interest rates in June, market liquidity will significantly increase, driving capital from Bitcoin to altcoins. Historical data shows that the altcoin season typically occurs a year after Bitcoin halving, and the liquidity injection in 2025 may accelerate this cycle.
Technological Innovation: The integration of AI and blockchain technology provides a new narrative for altcoins. For example, Solana has become the preferred blockchain for DeFi and NFT development due to its high TPS and low fees, while Chainlink, as a leading decentralized oracle, supports over 80% of on-chain data interaction needs.
Regulatory Easing: The U.S. SEC's crackdown on the crypto industry has eased, and more projects are attempting to comply. For example, the potential approval of a spot Bitcoin ETF for Solana will attract compliant capital into the market, driving up altcoin prices.
However, there are significant risks in the altcoin market:
High Interest Rates and Strong Dollar: A broader economic environment may limit the liquidity attractiveness of altcoins.
Quality of Projects Varies: Most altcoins lack substantial value and rely on speculative trading, limiting their price increases.
Regulatory Uncertainty: Uncertainty in global regulatory policies (such as NFT trading restrictions) may hinder ecosystem development.
Investment Recommendations and Risk Warnings
Bitcoin Investment: Investors are advised to pay attention to the Federal Reserve's monetary policy trends and ETF capital flows. If the Federal Reserve lowers interest rates before June and inflationary pressures ease, Bitcoin may break through resistance levels and reach new highs. However, be wary of the risk of policy tightening beyond expectations.
Altcoin Investment: Investors are advised to focus on leading projects (such as SOL, LINK) and technological innovation sectors (such as AI, RWA). Use a “core + satellite” strategy, allocating 70% of positions to leading projects and 30% to explore innovative sectors. Avoid speculative behavior in long-tail MEME coins.
Risk Management: The cryptocurrency market is highly volatile; investors are advised to set stop-loss levels and regularly rebalance. For example, if Bitcoin falls below a key support level (such as $85,000), timely stop-loss actions should be taken.
Conclusion
There is uncertainty regarding the number and pace of interest rate cuts by the Federal Reserve in 2025, and predictions of Bitcoin reaching new highs before June need to be comprehensively judged by multiple factors. Although the altcoin market has breakout potential, investors should be aware of the high risks. It is recommended that investors maintain a cautious attitude, adjust strategies based on market cycles, project fundamentals, and macro policy dynamics, and avoid blindly following trends.
