From a historical review, the Federal Reserve's interest rate cuts can be divided into two categories: preventive cuts and relief cuts. The years 1990, 1995, and 2019 belong to the former, where cuts occurred before the economy fully declined, primarily to hedge against risks, often injecting a new round of growth momentum into the market; while in 2001 and 2008, the cuts were forced under the heavy pressure of financial crises, leading to severe market declines. In the current context, the labor market is weak, tariffs and geopolitical issues bring uncertainty, but inflation shows signs of easing, making the overall environment closer to a 'preventive interest rate cut' rather than a crisis background. It is precisely for this reason that risk assets have continued to strengthen this year, with both Bitcoin and US stocks hitting historical highs.
The environment facing the crypto market is also different from before. Policy-wise, it has welcomed unprecedented favorable conditions: stablecoins are gradually included in compliance frameworks, Digital Asset Treasuries (DAT) and treasury management represented by MicroStrategy have become trends for corporate allocations, institutions are officially entering through ETFs, and the tokenization narrative of Real World Assets (RWA) is accelerating in popularity. Different narratives intertwine, driving a broader market foundation than ever before.
Although many debate whether the rate cut in September will cause the crypto market to peak in the short term, from the perspective of capital flow, this concern may be excessive. The size of U.S. money market funds has reached a record $7.2 trillion, with large amounts of capital trapped in low-risk instruments. Historically, outflows from money market funds often correlate positively with the rise of risk assets. As the rate cuts take effect, their yield attractiveness will gradually weaken, and more funds are expected to be released into crypto and other high-risk assets. It can be said that this unprecedented cash reserve is the strongest potential powder keg for this bull market.
Moreover, structurally, funds have begun to gradually leave Bitcoin. BTC's market dominance has dropped from 65% in May to 59% in August, while the total market cap of altcoins has grown by over 50% since early July, reaching $1.4 trillion. Although CoinMarketCap's 'Altcoin Season Index' remains around 40, far from the traditional threshold of 75 defining altcoin season, this divergence of 'indicator stagnation - market cap soaring' precisely reveals that funds are selectively entering specific sectors, especially Ethereum (ETH). ETH not only benefits from institutional interest as ETF sizes exceed $22 billion, but also carries the core narratives of stablecoins and Real World Assets (RWA), possessing a funding attraction that surpasses Bitcoin.
Summary$BTC
The logic of this bull market is fundamentally different from the past. Due to the large number of projects, the market can no longer replicate the 'hundreds of coins flying together' phenomenon. Investors' focus is gradually shifting towards value investing and structural opportunities—capital is more willing to flow towards leading projects with real cash flow, compliant prospects, or narrative advantages, while long-tail assets lacking fundamental support are destined to be marginalized.
At the same time, the overall market valuation is at a high level, and whether the fiscal and monetary strategies are at risk of being 'over-financialized' remains uncertain. Once there is a concentrated sell-off by institutions or project parties, it can easily trigger a cascading effect, causing a deep impact on the market. Coupled with global macro uncertainties (such as tariffs, geopolitical issues, etc.), investors cannot ignore potential volatility.
Therefore, although we are optimistic about the performance of crypto assets under the interest rate cut cycle and policy benefits, we must acknowledge that this resembles more of a structural bull market rather than indiscriminate rises. Rational investment and careful selection of sectors are the keys to navigating volatility.