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Fans call "Dabai" the "Buffett of rising markets and Soros of falling markets." As a leader in the crypto field, Dabai focuses on spot trading and uses contract operations as a supplement. With accurate market judgment and stable operating style, he has become an all-round trading expert.
Dabai is also a senior analyst in the blockchain market for spot, contract, and on-chain golden dog layout, with a win rate of over 96%!
Preface
This September, the Fed's rate cut is basically a "sure thing." The question that everyone is most concerned about now is: Will the market really rise after the rate cut?
From historical experience, the probability of the stock market rising after a rate cut is indeed relatively high, but it will not "rise immediately after a cut", and sometimes it will even fall a wave first.
In the eyes of many people, rate cuts = easing = stock market rise, this logic seems very reasonable. But if we review the data from the past 30 years, we will find that things are not that simple. The Fed sometimes cuts interest rates to "prevent economic downturn", and sometimes to "rescue the market". The market reaction in different situations is also completely different.
Since 1990, the Federal Reserve has experienced a total of 5 rounds of rate cuts, and the results of each time are different:
After some rate cuts, the stock market took off immediately;
After some rate cuts, the market fell first and then rose;
After other rate cuts, the economy got even worse, and the stock market continued to fall…
Therefore, rate cuts ≠ automatically starting a bull market, the key depends on the economic environment at the time.
Now, market expectations for a rate cut in September are very high (probability exceeding 80%), and many people are starting to fantasize about the "rate cut = bull market" scenario again. After all, in the past year, although the Fed has not cut interest rates, US stocks have still hit new highs, Bitcoin has soared, and Coinbase even predicts that "altcoins will soar after the rate cut."
But the question is: Will history really repeat itself this time? To figure out the answer, we reviewed the 5 rate cut cycles since 1990 to see how the market actually behaves after rate cuts.
One: A complete review of the Fed's 5 rate cut cycles in 30 years
1990-1992: War + banking crisis, rate cuts to save the market
Background:
The Gulf War broke out, and oil prices soared
The US banking system collapsed (Savings and Loan crisis)
The economy suddenly braked and went directly into recession
Fed operation:
Crazy 5% rate cut in 2 years, interest rates from 8% to 3%
Result:
Economic recovery: GDP rebounded from -0.1% to +3.5%
Stock market rally: Nasdaq soared 47%
Insight: Rate cuts really work when the economy is bad
1995-1998: Preventive rate cuts + Asian financial storm
Background:
The US economy was originally doing well
But the Asian financial crisis broke out (Thai and Korean currencies collapsed)
Wall Street hedge fund LTCM almost collapsed
Fed operation:
3 rate cuts in 3 months, interest rates from 5.5% to 4.75%
Result:
US stocks start a bull market: Nasdaq up 134%
Directly fueled the dot-com bubble
Lesson: Too much rate cut and easing will bury hidden dangers
2001-2003: The dot-com bubble burst
Background:
Tech stock crash (Nasdaq halved)
9/11 terrorist attacks made things worse
Unemployment soared
Fed operation:
5.5% rate cut in 2 years, interest rates from 6.5% to 1%
Result:
The stock market continues to fall: Nasdaq falls another 12%
Key: The bubble bursts, and rate cuts can't save it
2007-2009: Subprime crisis and major crash
Background:
Real estate bubble burst
Lehman Brothers collapsed
Global financial crisis
Fed operation:
5% rate cut in more than 1 year, interest rates directly reduced to 0%
Result:
Stock market halved: S&P plunged 56%
Bloody lesson: When the economy collapses, rate cuts are like using a band-aid to save a massive hemorrhage
2019-2021: Massive easing during the pandemic
Background:
Originally just to prevent an economic downturn
Suddenly encountered the COVID-19 pandemic
US stocks circuit breaker 4 times in 10 days
Fed operation:
2% rate cut in 1 month, interest rates back to zero + crazy printing money
Result:
US stocks V-shaped reversal: Nasdaq soared 166%
Magical reality: The more easing, the happier the stock market
Which history will be repeated in 2025?
▶️ Optimistic Scenario: Like 1995 or 2019, rate cuts = bull market takeoff
▶️ Pessimistic Scenario: Like 2001 or 2008, rate cuts are useless if there are problems with the economy
▶️ Biggest Variable: Can inflation really be suppressed this time?
Two: Two Crazy Bull Markets in the Crypto Market
2017 ICO craze vs 2021 DeFi explosion
1. 2017: ICO wealth creation, a year of carnival for retail investors
Background:
The Fed is still in the era of low interest rates, and there is too much money to spend
Bitcoin soared from $1,000 to $20,000, and everyone was jealous
Crazy famous scene:
Birth of the ICO model: You can issue coins and raise money by simply writing a white paper
Ethereum takes off: Because all ICOs use ETH for fundraising, the price rises from $8 to $1400
Hundreds of coins flying together: Even worthless coins can double in a day, and everyone in the group is shouting "All in"
Result:
2018 major crash: 90% of altcoins went to zero
Lesson: Tokens with no practical use are bubbles no matter how much they rise
2. 2021: The Fed prints money like crazy, and the crypto market is playing tricks
Background:
The pandemic strikes, and the Fed's interest rates are directly reduced to 0%
The US is issuing money wildly, and retail investors are playing with relief funds
Three major explosive points:
DeFi revolution: Uniswap, Aave and other decentralized exchanges became popular, and you can earn interest by depositing coins
NFT carnival: Monkey avatars sold for millions, and OpenSea trading volume exploded
Public chain battle: Solana and Avalanche challenge Ethereum, SOL rose 100 times in a year
Magical reality:
ETH surged to $4800, SOL rose to $250
The total market value of cryptocurrencies exceeded 3 trillion US dollars
Result:
The rate hike began in 2022, and altcoins fell by an average of 80%
Truth: The tide rises, and the tide recedes and reveals who's swimming naked
Comparison of two bull markets
Features
2017 ICO Bubble
2021 DeFi/NFT craze
Driving force retail investors FOMO sentiment Fed easing mark white paper fundraising real projects emerge gains ETH 100x SOL 100x collapse range 90% to zero 80% halved
Soul-searching question:
➤ Will the next bull market be a new routine?
➤ Can the Meme coin wealth explosion be repeated?
Three: The Fed's Rate Cuts' Impact on the Crypto Market: A Full Analysis
One: The Fed's "Two Scenarios" for Rate Cuts
Preventive Rate Cuts (1995/2019)
The economy hasn't collapsed yet, but giving a preemptive shot
The stock market/crypto world often starts a new bull market
Like refueling a car that's running out of gas in advance
Lifesaving Rate Cuts (2001/2008)
Rescuing the economy only after it enters the ICU
The market usually crashes first and then rebounds
Similar to being sent to the hospital only when critically ill, prone to leaving sequelae
Current situation assessment: More like the first type! Inflation cooling + weak employment data, the Fed is "preventing problems before they happen"
Two: The crypto market welcomes three historical benefits
✅ Institutional regular army enters the market
Bitcoin ETFs attract 22 billion US dollars
MicroStrategy and other listed companies are frantically hoarding coins
Wall Street bigwigs no longer scold "scams"
✅ Legalization of stablecoins
USDT/USDC becomes compliant "crypto dollar"
Daily trading volume exceeds 100 billion
Equipping the market with a stabilizer
✅ RWA (Real World Assets on Chain)
Treasury bonds and real estate are issuing "crypto certificates"
New channels for traditional funds to enter
Three: A $7.2 trillion "powder keg" is about to explode
Money market funds have hoarded the most cash in history (enough to buy the entire crypto market 5 times!)
After the rate cut, the returns on this money will decrease, and it will inevitably seek new avenues
Data from the past 20 years: Outflow of funds from money market funds = soaring risk assets
4. Funds are quietly rebalancing positions
Latest Trends:
Bitcoin's share drops from 65% → 59% (fund diversion)
Total market value of altcoins soared 50%
But it's not yet the season of "demons dancing wildly"
The choice of smart money:
Focus on ETH (with ETF + stablecoin + RWA three concepts)
Mainstream public chains such as SOL and AVAX
Avoid worthless coins (this bull market does not speculate on garbage coins)
Five: Investment Advice: Beware of the "Sweet Trap"
Risk warning:
Institutions may cash out at high positions (MicroStrategy has a floating profit of 6 billion US dollars)
The US election may trigger policy changes
Altcoins are no longer cheap, beware of taking over
Response strategy:
Main position BTC/ETH (70%)
Small bet on high-growth altcoins (20%)
Keep 10% cash to buy the dip after a crash
Six: Key Conclusions
This bull market is an "institutional bull + compliant bull", completely different from the retail-led speculative bull markets of the past. Remember these three sentences:
1️⃣ Don't All in worthless coins (you will die miserably)
2️⃣ Pay attention to the Fed's monthly speeches (more important than looking at K-lines)
3️⃣ Be willing to sell when prices rise too much (institutions are doing wave trading)
