Recently, the investment community is observing, waiting for the Federal Reserve to announce the interest rate decision at 2 AM Beijing time on September 18. The rate cuts that started in September last year have entered the 5th meeting, and a further reduction of 25 basis points is expected, lowering the rate from 4.5% to 4.25%.

What does a rate cut really mean? History gives you the answer.

There are three classic models of Federal Reserve rate cuts:

  • 1995 'Preventive Rate Cut': The economy was robust but slightly overheated, leading to a small rate cut, which resulted in the U.S. stock market entering an internet bull market, with the Nasdaq rising fivefold.

  • 2007 'Rescue Rate Cut': The economy was already in crisis, and a significant rate cut still could not prevent the outbreak of the financial crisis, leading to a subsequent sharp decline in the stock market.

  • In 2020, the 'panic interest rate cuts': the COVID-19 pandemic triggered rapid interest rate cuts and unlimited quantitative easing, leading to a financial asset frenzy, and Bitcoin surged 17 times!

It now seems more like the preemptive interest rate cuts of 1995, with low unemployment, GDP still growing, and inflation falling. However, there are a few points to be cautious about: the stock market is at a high level, the U.S. debt burden is heavy, and there is limited fiscal stimulus space.

Review of Bitcoin's performance in past interest rate cut cycles

  • In 2019, when the Federal Reserve first cut interest rates, investor confidence was insufficient, and Bitcoin failed to sustain gains, only experiencing small fluctuations.

  • In March 2020, the Federal Reserve urgently cut interest rates, and initially, Bitcoin experienced a 'Black Thursday' crash, but then it began the strongest rebound in history, with prices skyrocketing from $3,800 to nearly $70,000.

The key lies in the intensity of the interest rate cuts and the market environment— in 2020, the 'floodgates were opened' and liquidity was explosively released, with institutions buying madly, which led to this surge.

What scene will the interest rate cut cycle of 2025 replicate?

It is expected that within the next 12-18 months, a total of 100-150 basis points will be cut, at which point interest rates will fall to about 3%-3.5%. Compared to the complete 'flooding' of 2020, the intensity of the interest rate cuts will be moderate, with the market being more rational. Although Bitcoin's price is at a historical high (around $115,000), market confidence is relatively strong.

The approval of ETFs makes it easier for institutions to participate, but institutions will not blindly follow trends. It is expected that this will be a 'rational prosperity', focusing more on steady growth than on large fluctuations.

The next 6-12 months will be a key window period for the bull market🎯

Historical data shows that the late stage of the interest rate cut cycle is often the point of market explosion. After the last two interest rate cuts in 1995, the U.S. stock market ushered in a long bull market; six months after the interest rate cuts in 2020, Bitcoin started to soar significantly.

Investors need to remain patient and closely monitor changes in the broader environment. If U.S. stocks and gold rise simultaneously, funds may be diverted, affecting Bitcoin's performance.

Conclusion

The world is changing, and the monetary system, value storage, and wealth circulation are all accelerating. Bitcoin is not just an asset; it is a reflection of the era's transformation. Instead of fixating on price fluctuations, why not ask yourself: are you ready to embrace new opportunities in this wave of change?

The interest rate cut cycle is just the beginning; the real drama is yet to come.

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