Recently, the Federal Reserve's expectations for interest rate cuts have stirred up a huge wave, like a boulder thrown into the deep waters of the cryptocurrency market. Predictions from institutions are bolder than ever, intensifying the bullish-bearish competition in the market, and making our investor hearts race with anxiety.
Top investment banks such as Standard Chartered, Macquarie, and Barclays have all adjusted their predictions for the Federal Reserve's interest rate cuts, making a complete 180-degree turn in attitude. Standard Chartered has shifted from its usual conservatism, directly predicting a possible 50 basis point cut in September, which is quite a bold move; Macquarie believes there will be 25 basis point cuts in both September and October, with a noticeably faster pace, considering that everyone originally thought rate cuts would be delayed until December; Barclays is even more aggressive, predicting consecutive rate cuts in September, October, and December, though it feels that a single 50 basis point cut is a bit too radical.
These investment banks have suddenly collectively turned from "hawkish to dovish", which ultimately still depends on the economic data. Once employment data weakens and the inflation indicators drop slightly, the market immediately starts to estimate the extent of interest rate cuts, after all, economic data is an important basis for the Federal Reserve to formulate monetary policy. Once the job market and inflation show signs of trouble, they are like startled birds, quickly adjusting their forecasts.
If the Federal Reserve really starts a continuous interest rate cut mode, then the liquidity gate will be completely opened. It should be noted that in the cryptocurrency circle, funds are the "fuel" that drives the market. With sufficient liquidity, a large amount of funds will flood in, and the cryptocurrency market is likely to welcome another round of "bull" market, with various digital currency prices soaring, just thinking about it is exciting.
However, we should not be blinded by this seemingly bright prospect. The predictions of these investment banks can often be "slapped in the face". Just last year, they confidently said, "Only 3 rate cuts in 2024", but what happened? Now the predictions almost suggest a rate cut every month, changing faster than flipping a book. Therefore, we must view their words rationally and cannot believe them completely.
Another key question is, if the Federal Reserve really cuts interest rates by 50 basis points in September, will it initiate a new round of bull market in the cryptocurrency circle, or will the good news be fully priced in and lead to a sell-off? From past experiences, the market often sees the situation of "buying the expectation, selling the fact". When everyone expects that the interest rate cut will bring good news, they buy in advance, but when the rate cut is actually implemented, it may lead to a price drop due to profit-taking. However, the situation in the cryptocurrency circle is very complex and full of uncertainties, and it may also trigger a larger upward trend due to the huge benefits of the interest rate cut.
In any case, at this critical moment full of uncertainties, we investors must maintain a clear mind, closely monitor the Federal Reserve’s movements and changes in economic data, and make investment decisions cautiously. After all, in the high-risk, high-reward cryptocurrency market, a small mistake could lead to a complete loss. Do you think if the Federal Reserve really cuts interest rates by 50 basis points in September, will the cryptocurrency market rise or fall?
