The market has wildly bet on a rate cut in September:
Event: CME 'Fed Watch' shows that the probability of a rate cut in September has skyrocketed to 84.6% (almost a certainty), and the probability of a 50 basis point cut in October is also over 50%.
Key words and insights: This is by no means a rational expectation, but rather a one-sided wish of the market! The current pricing of a rate cut has been severely overdrawn:
Inflation remains the 'elephant in the room': Despite the cooling of CPI in June, core inflation is stubborn, wage growth is strong, and geopolitical conflicts are pushing up energy prices (Trump's tariffs are pouring oil on the fire), the Fed is highly unlikely to turn as aggressively!
Historical lesson: At the beginning of 2023, the market also made crazy bets on a rate cut in March, only to be hit by the Fed's 'hawkish blow', resulting in a 10% single-day drop in BTC. Overly optimistic expectations = bull market meat grinder!
The deadly trap in the crypto circle: 'Buy the expectation, sell the fact':
Logical deduction: If there is indeed a rate cut in September (even 25 basis points), it is highly likely to be 'good news already priced in'—whales take the opportunity to sell off, concentrated long positions may trigger a liquidation cascade.
If the rate cut is delayed (probability 15.4%): It will be a nuclear-level negative! High interest rates continue to suppress risk assets, and a liquidity crisis in the crypto market may reappear.
Key words and insights: The current probability of 84.6% is itself the biggest risk! The crypto circle needs to be wary of two scenarios:
Scenario 1 (Gentle Cut): A symbolic 25 basis point cut in September, but Powell signals a 'hawkish pause' (implying no further cuts this year), leading to a crash in BTC as the good news is priced in.
Scenario 2 (Guillotine): Unexpectedly hot inflation/employment data in August causes the probability of a rate cut to collapse instantly, leading to a bloodbath in high-leverage contracts. Refer to the terrible incident where BTC plunged 20% in a single day after the US CPI was announced in September 2022!
Behind the 84.6% frenzy lies a 15.4% nuclear explosion risk! When the entire market is betting on the Fed bending, are you prepared with an 'escape pod' for the 'disappointment of expectations'?
Pay attention to the Block Key, which will reveal how three major on-chain whales are positioning themselves for the rate cut black swan—are they crazily bottom-fishing, or is there a hidden short-sell trap? Let me know in the comments: Do you think a rate cut in September is 'a quick return of the bulls' or 'the grave of the bulls'?
