I. Federal Reserve Meeting: Market Expectations and Policy Logic
The Federal Reserve will hold its third meeting of the year from May 6 to 7, with the market generally expecting this meeting to keep interest rates unchanged, maintaining the benchmark rate in the range of 4.25%-4.5%. This judgment is based on multiple economic data supports:
- Labor Market Resilience: In April, non-farm employment increased by 177,000, the unemployment rate remained stable at 4.2%, and core hourly wages rose by 0.2% month-on-month, indicating that the labor market has not significantly deteriorated.
- Repeated Inflation Pressures: Core PCE inflation rebounded to 3.5% in the first quarter, exceeding the Federal Reserve's target of 2%, leaving insufficient momentum for rate cuts in the short term.
- Policy Stance Hawkish: Federal Reserve Governor Waller and other officials have recently released intensive signals of 'patience,' emphasizing that policy adjustments will only occur when the labor market shows significant weakness.
However, the market's speculation on subsequent rate cuts is heating up. CME FedWatch data shows that the probability of a rate cut in June has risen to 45.9%, with an annual cumulative expectation of 83 basis points. This expectation stems from two major contradictions:
1. Economic Recession Risks: In the first quarter, GDP contracted by 0.3% quarter-on-quarter, the growth rate of private sector employment slowed, and the corporate inventory cycle entered a phase of passive accumulation.
2. Limited Policy Space: The tariff policy of the Trump administration may raise import costs, exacerbating 'stagflation' risks and forcing the Federal Reserve to pivot sooner.
II. Historical Connection Between Bitcoin and Federal Reserve Policy
As a high-risk asset, Bitcoin's price has a significant correlation with Federal Reserve monetary policy:
- Rate Cut Cycle: In March 2020, the Federal Reserve initiated unlimited QE, and Bitcoin's price soared from $5,000 to $68,000; after a 25 basis point rate cut in December 2024, Bitcoin briefly broke through $100,000.
- Interest Rate Hike Cycle: After the interest rate hike started in March 2022, the price of Bitcoin plummeted from $47,000 to $15,000; after pausing rate hikes in June 2023, Bitcoin rebounded to $30,000.
The current market environment is similar to that during the December 2024 rate cut:
- Speculation on Diverging Expectations: Although the market has partially digested rate cut expectations, the Federal Reserve's dovish statements on the number of rate cuts may trigger overshooting.
- Liquidity Transmission: If the Federal Reserve releases easing signals, increased dollar liquidity will drive funds into cryptocurrencies and other risk assets.
III. Assessment of Rate Cut Possibility in May
The probability of a rate cut in May is less than 3%, but attention should be paid to three major variables:
1. Economic Data Deterioration: If May non-farm employment numbers are below 100,000, or core PCE inflation falls below 3%, it may trigger a policy shift.
2. Geopolitical Shock: If there is significant progress in US-China trade negotiations, it may alleviate market uncertainty and reduce the urgency for rate cuts.
3. Financial Market Volatility: If US stocks break key support levels (such as the S&P 500 index at 5,500), it may force the Federal Reserve to act sooner.
IV. Short-Term Analysis of Bitcoin's Trends
Ahead of the Federal Reserve meeting, Bitcoin may exhibit the following characteristics:
- Technical Pressure: The current price is at $95,800, with short-term support at $93,775 and resistance at $98,035. MACD indicates strong bearish pressure, while the KDJ golden cross suggests potential overselling.
- Differentiated Capital Flow: Institutional funds continuously flow in through ETFs (BlackRock Bitcoin ETF holdings exceed 375,000), but retail investor sentiment is cautious, with the fear and greed index falling to 65.
- Event-Driven Risks: If Powell releases 'hawkish' signals during the press conference, Bitcoin may dip to $90,000; if he mentions 'concern about economic downturn risks,' it may rebound to $100,000.
V. Outlook for the Cryptocurrency Market: Structural Opportunities and Risks
1. Bitcoin: Seeking support amidst volatility
- Short-term: The Federal Reserve meeting may trigger a 5%-10% fluctuation, suggesting attention to the $94,000 support level and the $98,000 resistance level.
- Mid-Term: If a rate cut occurs in June, Bitcoin is expected to break through $120,000; if the economy experiences a 'soft landing,' it may oscillate in the $80,000-$100,000 range.
2. Altcoins: Increased differentiation
- Leading Varieties: Ethereum (ETH) benefits from the expansion of the DeFi ecosystem and may follow Bitcoin's rise, but regulatory risks from the SEC need to be watched.
- Subject Matter Coins: AI concept tokens (such as FET, AGIX) may be affected by the volatility of US tech stocks, leading to increased fluctuations.
- Risk Warning: Small-cap altcoins have poor liquidity and are vulnerable to capital withdrawal shocks; caution is advised for participation.
3. Regulatory and Policy Variables
- US SEC Review: Cryptocurrencies are listed as a regulatory focus for 2025, and the compliance review of spot ETFs may lead to market volatility.
- Geopolitical Factors: Progress in US-China trade negotiations, the situation in the Middle East, etc., may affect capital flow.
VI. Investor Strategy Recommendations
1. Short-term Traders:
- Range Trading: Buy low and sell high in the $93,000-$98,000 range, setting stop-loss and take-profit.
- Event Hedging: If the Federal Reserve releases dovish signals, one can go long on Bitcoin futures; if hawkish, one can allocate to stablecoins or gold.
2. Long-term Holders:
- Buy on Dips: Bitcoin has long-term allocation value below $90,000, and one can refer to the 'Dollar-Cost Averaging Strategy.'
- Diversified Holdings: Allocate 50% to Bitcoin, 30% to Ethereum, and 20% to quality altcoins.
3. Risk Control:
- Position Management: Total position should not exceed 50%, avoid leveraged trading.
- Sentiment Management: Pay attention to the fear and greed index, avoiding chasing after spikes and selling at dips.
VII. Conclusion: Market Balance Under Policy Game
The Federal Reserve's meeting will become a key catalyst for Bitcoin's short-term trend, while the probability of a rate cut in May is low. Investors need to find a balance between policy uncertainty and market liquidity, focusing on three key signals:
1. Economic Data: Non-farm employment, core PCE inflation, PMI index.
2. Policy Stance: Powell's statements regarding the rate cut path.
3. Capital Flow: Changes in Bitcoin ETF holdings, on-chain transfer data.
In a structural market, Bitcoin's 'digital gold' property may further stand out, while altcoins will show a pattern of 'the strong getting stronger and the weak being eliminated.' Investors should remain patient and look for certain opportunities amidst volatility.