I. Central Bank Rate Cut: Potential opportunities under liquidity expectations

On May 7, the People's Bank of China announced a rate cut, with the re-lending rate for agriculture and small businesses reduced by 0.25 percentage points, leading to a corresponding decrease in personal mortgage rates. This move lowers the cost of loans for banks to businesses and individuals, which will increase market liquidity.

For the crypto market, this may be a potential good news. After the rate cut, the interest earned by residents depositing in banks decreases, and some funds may shift towards investment. Although cryptocurrencies carry high risks, increased market liquidity may drive their prices up. For example, during the Federal Reserve's massive liquidity injection in 2020, the price of Bitcoin rose from $6,000 to $69,000, a typical case driven by liquidity.

However, this rate cut is relatively small, and the Federal Reserve has yet to take action, so the actual effect may be limited. Some analysts point out that we cannot expect the rate cut to directly drive up crypto prices; the key lies in the actual flow of funds. If significant capital flows into areas like real estate, the crypto market may respond tepidly.

II. Ethereum upgrade: Market games behind the technological breakthrough

On the same day, Ethereum will welcome the Pectra upgrade, which mainly brings three changes:

- Improved transaction efficiency: Account abstraction technology reduces transfer confirmation time from 12 seconds to 3 seconds, with Gas fees cut by 63%, significantly optimizing the transfer experience.

- Storage expansion: After the Blob storage upgrade, Ethereum can handle more data, DAPP operation is smoother, and the experience of on-chain games and NFT transactions is significantly improved.

- Enhanced staking flexibility: The validator staking limit has been raised from 32 ETH to 2048 ETH, reducing yield volatility by half, making it more attractive to institutional investors.

Technological upgrades are generally seen as positive, but the market's reaction is rather complicated. On one hand, the upgrade may enhance Ethereum's performance, potentially attracting more developers and users; on the other hand, historically, after multiple upgrades (like Merge, Dencun), the price of ETH did not immediately rise significantly and even experienced situations where 'good news becomes bad news' right after the event. Currently, the price of ETH is around $1,833; whether it can break through $2,000 depends on market sentiment and capital coordination.

III. The eve of the Federal Reserve's decision: wording determines short-term direction

At 2 AM on May 8 (Beijing time), the Federal Reserve will announce its interest rate decision. The market generally expects this meeting to maintain the interest rate (probability 97.6%), but the wording after the decision is crucial.

If Powell signals that 'a rate cut may happen in June', the dollar may weaken, and dollar-denominated assets like Bitcoin may rise. Conversely, if he emphasizes 'stubborn inflation, continue to observe', the market may react in advance, triggering a short-term correction.

It is noteworthy that the funds betting on 'no rate cut' on the Polymarket platform exceed $30 million, indicating that large funds tend to be conservative. This expectation difference may lead to significant market volatility after the decision is announced: if there is indeed no rate cut, panic may release and rebound; if a surprise rate cut occurs, there may be an advance rally, followed by a correction after the event.

IV. Triple events overlap: Outlook for the crypto market

- Short-term volatility will intensify: The positive effects of the rate cut and upgrade may be offset by the uncertainty of the Federal Reserve's decision. Bitcoin may fluctuate in the $96,000-$98,000 range, while Ethereum may oscillate between $1,800-$1,900.

- Key technical level: If Bitcoin stabilizes above $97,500, it may challenge $100,000; if it falls below $96,000, it may drop to $95,000.

- Long-term logic remains unchanged: If the Federal Reserve begins to cut rates in June, coupled with the prosperity of the Ethereum ecosystem post-upgrade, the second half of the year may welcome a true bull market. However, it currently resembles a 'rebound' rather than a reversal, as altcoins have yet to catch up, and MEME coins on the SOL chain have not become active.

V. Advice for ordinary investors

- Avoid chasing high prices: The good news from the rate cut and upgrade may have been partially digested by the market, and chasing gains can easily lead to being trapped.

- Pay attention to non-farm data: Tonight's unemployment rate data is crucial; if it exceeds 4.2%, it may accelerate interest rate cut expectations, benefiting the crypto market; conversely, the market may come under pressure.

- Diversified investment: Do not invest all funds in cryptocurrencies; at least keep 70% of funds in cash or low-risk assets, such as gold and government bonds.

Conclusion: Technology and policy shape the market together

The Ethereum upgrade provides technical support for the crypto market, while the central bank's rate cut brings liquidity expectations, and the Federal Reserve's decision acts as the 'steering wheel' for the short-term market. The triple events on May 7 may become a watershed for the crypto market's performance in the second half of the year. For ordinary investors, rather than getting caught up in short-term fluctuations, it is better to focus on long-term trends: if the Federal Reserve really begins to cut rates, combined with Ethereum's performance improvement, the crypto market is likely to welcome a new wave of increases. However, before that, maintaining patience and rationality is crucial.