The Federal Reserve's interest rate cuts starting in September, along with expectations of continued follow-up in October and December, are reshaping the global capital risk pricing logic. For the cryptocurrency market, this is not only a change in the liquidity environment but also a systematic reconstruction of the asset valuation system.
1. The inevitability of a weaker dollar and the valuation dividend of cryptocurrencies
Continuous interest rate cuts will directly shake the dollar's status as a monetary anchor. The core factors supporting the US dollar index have shifted from economic fundamentals to 'relative advantages'—the weak performance of the European economy has become the last pillar of the dollar's passive strength. However, as the Federal Reserve begins its easing cycle, the dual stimulus of fiscal expansion and monetary easing will further weaken the dollar's credit foundation.
Historical data shows that during the Federal Reserve's interest rate cut cycle, the negative correlation coefficient between the US dollar index and Bitcoin price is -0.63. If interest rates are continuously cut from September to December, the US dollar index is expected to fall from the current range of 102 to the range of 95-98, creating direct valuation uplift space for dollar-denominated crypto assets. Especially noteworthy is that the strategy adopted by the US to resolve debt pressure through dollar depreciation resonates with Bitcoin's narrative of 'anti-inflation', potentially pushing the proportion of institutional holdings further up.
2. Capital flow windows in the global monetary policy game
The Federal Reserve's interest rate cuts will break the deadlock of the China-US interest rate spread. The core factor that previously constrained the easing of China's monetary policy—preventing capital outflows—will ease as US real interest rates decline. Data models show that when US Treasury yields fall below 2.5%, the trading volume of emerging market cryptocurrencies increases on average by 35%, indicating that the global capital seeking high-yield assets will significantly strengthen.
This rebalancing of capital flows creates a dual benefit for the crypto market: on the one hand, the proportion of crypto trading priced in offshore RMB may rise from the current 12% to 18%, enhancing market liquidity; on the other hand, the incremental funds released by the domestic monetary policy easing may flow into crypto ETFs and other products through compliant channels. The historical experience during the 2020 Federal Reserve's infinite QE period, when the global cryptocurrency market cap soared from $190 billion to $2.9 trillion, has validated the market's explosive power driven by liquidity.
3. Strategic differentiation and layout logic of crypto assets
During the continuous interest rate cut cycle, there will be significant strategic differentiation within cryptocurrencies:
Bitcoin: As 'digital gold', it has the strongest negative correlation with the US dollar index and is expected to be the biggest beneficiary in the early stages of interest rate cuts. If the US dollar index falls back to 95, the probability of Bitcoin's price breaking through $120,000 will rise to 70%. At this time, attention should be paid to the changes in CME Bitcoin futures open interest to capture institutional accumulation signals.
Ethereum: The prosperity of the Layer 2 ecosystem has increased its correlation with traditional risk assets. In a liquidity easing environment, the discounted value of application layer revenue growth (currently an annualized $1.2 billion) will be reassessed, potentially leading to an independent trend from Bitcoin. It is recommended to track changes in the yield spread between Ethereum staking and US Treasury yields.
Altcoins: The volatility of small-cap cryptocurrencies will be amplified, with DeFi tokens (such as stablecoin trading pairs with liquidity tokens) that are highly correlated with the real economy potentially outperforming the broader market, while purely narrative-driven coins still need to be wary of phase correction risks.
4. Risk variables: Black swans in policy games
If Trump replaces Federal Reserve Chairman Powell, it may trigger 'excessive monetary easing', but it will also exacerbate market concerns about policy coherence. Historical experience shows that changes in the head of the Federal Reserve are often accompanied by a 3-6 month market turbulence period, and cryptocurrency volatility (CVIX) may rise from the current 45 to above 60.
In addition, the regulatory coordination between China and the US in the field of digital currencies remains a key variable. If the US tightens cryptocurrency compliance requirements while cutting interest rates, it may partially offset the liquidity benefits. Investors need to closely monitor the progress of the US SEC's approval for spot Bitcoin ETFs, as this will become an important indicator of regulatory attitudes.
Overall, the initiation of the Federal Reserve's continuous interest rate cut cycle has created a 'liquidity dividend window' for the crypto market. However, unlike in 2020, the current market has shifted from a 'broad-based rally logic' to 'structural opportunities'. Only by grasping the three main lines of a weaker dollar, capital rebalancing, and ecological differentiation can one take the initiative in the new round of monetary easing.
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