How does Federal Reserve policy manipulate cryptocurrency? Decoding the secret connection between Bitcoin and global liquidity
The cryptocurrency market in the interest rate cut storm: a game of liquidity and expectations
Federal Reserve policy is the "invisible hand" of the cryptocurrency market.
From May to September, Bitcoin has fluctuated and plummeted multiple times due to interest rate cut expectations. Powell's ambiguous statements of "dovish with a hint of hawkish" have caused the market to oscillate repeatedly amid rate cut expectations—when expectations heat up, funds pour in; when expectations weaken, panic selling occurs. This 24-hour global capital game is essentially a struggle for liquidity.
As the "value anchor" of the cryptocurrency market, Bitcoin's price is deeply linked to global liquidity.
When the M2 of the four major economies—US, Europe, China, and Japan—expands, Bitcoin often rises in sync. The $3 trillion liquidity injection in 2020 directly propelled it to break through $60,000, and if the Federal Reserve cumulatively cuts interest rates by 150-200 basis points in 2024-2025, it may release $6-8 trillion in liquidity, a portion of which will inevitably flow into the cryptocurrency market.
Based on the liquidity transmission model, it has become highly probable for Bitcoin to break through its previous high of $124,000, but it requires time to ferment: monetary policy transmission takes 6-12 months, and the effects of interest rate cuts in 2024 will manifest in 2025; the allocation ratio of traditional giants like pension funds moving from 1% to 5% requires a process; technically, Bitcoin's weekly chart has formed an ascending triangle, and after breaking the $60,000 neckline, the target will come within reach.
On a deeper level, the cryptocurrency market is undergoing a paradigm shift. In a downcycle of traditional asset yields, Bitcoin is evolving from a "speculative asset" to a "safe-haven asset"—when fiat currency can be supplied infinitely, scarce digital assets naturally become a new choice for value storage. Behind this transformation is the redefinition of the essence of money by digital natives, as well as a microcosm of the reconstruction of the global monetary system.
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