Key takeaway: Last night's Federal Reserve meeting minutes sounded the alarm for cryptocurrency traders. The report states that for the next few years, it is highly likely that: interest rates will remain high, corporate cost pressures will not ease, and the economy may continue to 'catch a cold' for years. These three factors combined are not good news for high-risk assets like Bitcoin, making it increasingly difficult to earn money.
First, let’s talk about what’s going on:
The Federal Reserve issued a report early yesterday morning (called the meeting minutes), stating a lot of things, but in summary, it boils down to three points, each of which feels like cold water thrown on the market:
1. High interest rates are here to stay: It's not just about further rate hikes, but this current high interest rate of 4.25%-4.5% is expected to last for quite a while (possibly for several years). Rate cuts? Don't think too optimistically.
2. Corporate cost pressures are significant: Although the tariffs added by the Americans have not increased as quickly as imagined, the cost pressure is still there, and it is a slow but steady drain, gradually shifting to the global supply chain. This is itself pushing up prices, making the Federal Reserve reluctant to easily cut rates.
3. Is economic recession unavoidable? The report contains a rather scary statement: before 2027, the unemployment rate might remain relatively high. This almost explicitly says the economy may experience a 'hard landing'—meaning the economy is failing, and unemployment will increase. This shatters the illusion that everyone thought we could have a 'soft landing' (smooth transition).
The impact on cryptocurrency trading (personal views and key points):
1. The story of Bitcoin 'anti-inflation' is nearly over:
The report directly debunks the idea that 'Bitcoin is like gold and can resist inflation.' You see, with high corporate costs and squeezed profits, when Wall Street's big institutions lack cash, volatile assets like Bitcoin are surely the first to be sold off. What safe haven? When it comes to lacking money, Bitcoin is often the first to be discarded.
Worse still, this cost pressure forces the Federal Reserve to avoid easing (cutting interest rates), and the liquidity that the market expects simply won't come. With high interest rates, borrowing money to trade cryptocurrencies or mine becomes costly, leading to thin profits.
2. High interest rates are strangling, funds are quickly 'dying of thirst':
With interest rates so high, it’s practically like strangling the cryptocurrency market! Those who hope that institutional investors will come in and drive prices up (you know, the idea of an 'institutional bull market') can take a break. Institutions are facing such high borrowing costs, why would they take the risk to buy coins? Isn't it better to buy some government bonds and earn interest steadily?
The specific impact is very obvious:
DeFi (various lending and financial services on different chains): Fewer people are borrowing, the returns on lent out money are low, the pool of money may be shrinking, and one day there could be a chain liquidation (forced closing). I've seen many who played high-leverage lending end up completely wiped out.
Miners: Electricity costs are extremely high, and if the price of cryptocurrencies doesn't rise or falls, many mining machines will have to shut down, making life difficult for miners. Last year, many mining farms were shut down due to financial losses.
New funds? Don't count on it; high interest rates are draining them. When outside funds see the risks and unstable returns here, who would come in? Historically, when interest rates remain this high for more than half a year, the cryptocurrency market typically experiences a significant drop (averaging a 38% decline). This is just the beginning of the struggle!
3. If the economy truly falters, Bitcoin's 'safe haven' persona will collapse:
If, as the report suggests, we experience 'stagflation' (poor economy + high prices) or 'recession' (poor economy + high unemployment), what will everyone do? Quickly find a safe place to hide! At this time, assets like Bitcoin, which are said to be digital assets but have good liquidity (easy to sell), will ironically become the first batch to be sold off—because they are easy to cash out. Isn't this logic a bit ironic? From my observation, when panic hits the market, liquid assets usually suffer first.
Smart money (whales, institutions) are already fleeing:
The open interest in futures contracts (CME) has plunged (down 12%).
On-chain data shows that large holders (whale addresses) have been crazily transferring out coins in the past few days (selling over 100,000 Bitcoins in three days, worth over $7 billion!).
Strangely, the US stock market is rising (even the S&P has hit record highs), but Bitcoin is falling (dropping below 28,000), indicating that Bitcoin is not following the 'risk appetite' trend at all; rather, there is capital 'pushing up to offload'.
Now at a critical position (a support level I am very concerned about):
The 'lifeline' valued by technical analysts—the 200-week moving average (long-term bull-bear boundary) has already been broken! The top priority now is whether it can be instantly pulled back to defend $114,821 (closer to the current market than the initial report of $128,000). If it cannot be defended soon, those algorithmic trades (robotic stop-losses) will trigger a massive sell-off, potentially crashing down to the next support level of $105,800 (near the 'shut down price' for many mining machines; if it reaches this level, the sell pressure will be even heavier).
My blunt summary and advice:
1. Wake up, stop dreaming! Whether you are a 'die-hard bull' (firmly believing in an immediate rebound), playing high-leverage contracts (with extremely high liquidation risk), relying on DeFi for interest, running a mining operation, or a large holder trying to make small moves, this current environment (tight money + potential collapse) is much more dangerous than usual! Awareness of risks must be heightened to the maximum.
2. Cash is king, survival is crucial! What are those big funds doing? They've secretly converted to gold, US Treasuries, or even just cash. The Federal Reserve is the one tightening the faucet. In the cryptocurrency market right now, it's not about how much one can earn, but about who can 'endure' and survive. I personally think that holding more USDT (stablecoins) or cash is not cowardice, but wisdom.
3. Don’t believe the old stories! The previously hyped positive narratives: such as anti-inflation, betting on the Federal Reserve easing, relying on institutions to drive prices up... now it seems this Federal Reserve report acts as a mirror, shattering these fantasies into pieces. The reality is harsh: the Federal Reserve is tightening (sucking liquidity out) and the market panic are at odds. This outcome will likely completely change how the cryptocurrency market values projects and operates. Don’t rush to 'buy the dip'; the 'bottom' may be much deeper. Stay vigilant, accumulate cash (ammunition), and only act after this storm has truly passed.
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