Today, as soon as I opened the cryptocurrency world, it was a complete mess:
🔻BTC fell over 1.1%, ETH fell over 2.5%, and smaller coins like ADA, DOGE, and POL fell over 3%.
Many people are confused:
"Didn't they say that the Fed not lowering interest rates means inflation is still present? Shouldn't that mean we should buy Bitcoin for hedging?"
"Why is there a widespread drop instead? Is this a sign of a market crash?"
Today, I will explain the underlying logic in simple terms 👇
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✅ 1. Core Reason: Market Disappointment + Expectations Missed
This time the Fed did not lower interest rates, but more importantly - did not release any 'dovish' signals!
The market had already speculated that "there might be a rate cut in the second half of the year," so many funds entered the market early to position themselves in risk assets (including Bitcoin, Ethereum, etc.).
The reality is: the Fed's stance remains hawkish, and vigilance against inflation has not eased.
👉 This led to the typical scenario of "good news realized = bad news" -
It's not that the drop was due to no rate cut, but rather that everyone was betting on a rate cut, which didn’t happen, leading to disappointed investors selling off.
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✅ 2. Is Bitcoin really an 'inflation hedge asset'? Or is it a 'risk asset'?
Many people have a misconception, thinking:
> "Inflation is here ➡️ Money is losing value ➡️ Buy BTC for hedging!"
Indeed, this statement is theoretically valid, but only applicable to long-term trends.
In reality, especially in the short-term market, most funds treat BTC and ETH as 'high-risk assets', rather than safe havens like gold.
When interest rates remain high, the dollar is strong, and global funds are tight:
👉 Investors will choose to sell off crypto assets and return to cash or dollar-denominated assets.
👉 The crypto market is treated as a 'cash machine', so it naturally has to drop.
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✅ 3. What other reasons are exacerbating the situation?
1️⃣ Technical Breakdown:
BTC and ETH are on the edge of important support, and once they break, it triggers a large number of automatic stop-loss orders, leading to selling.
2️⃣ Increased ETF Outflows:
A few days ago, Bitcoin ETFs (like BlackRock's IBIT) saw capital outflows, indicating that institutions are also withdrawing.
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📌 In summary:
> "Although cryptocurrencies like Bitcoin have a long-term anti-inflation logic, in the current environment where the Fed is not cutting interest rates and the dollar remains strong, they are still the first risk assets to be sold off in the short term."
