Will the market liquidity improve after an interest rate cut? Will Bitcoin surge? I don’t think so.
First, two points must be clarified: 1. The bull market started in January 2023 and has lasted for 2 years and 8 months. Is there such a thing as an eternal bull market? 2. Bitcoin has increased 8 times from its lowest point to its highest point, which is a sufficient increase.
Let’s make a hypothesis: if a 0.25% rate cut is confirmed on the 18th of next month. I do not deny that some funds will enter the crypto space, but how much can enter? After all, traditional financial markets, such as gold, stock markets, futures, and foreign exchange, will divert most of the funds, and right now, the US stock market is also at a high point. Large funds are more cautious and won’t rush in like retail investors, right? For large funds and institutions, risk is always the top priority.
Furthermore, a cut of only 0.25% does not mean that the interest rate becomes 0 or that it is interest-free; a 0.25% decrease is not significant. I checked, and the current interest rate is 4.25%–4.5%, so after the cut, it will still be 4%–4.25%. The interest rates are still high; isn't it good for large funds to just sit back and earn interest? For example, consider a downward-opening parabola; the interest rate is currently at the peak, and even after a 0.25% cut, it will still be near the peak, right?
Let's assume that there are 100 billion USD now sitting in a bank earning interest, just waiting to buy Bitcoin after next month's rate cut. Think about it, why didn't this 100 billion buy Bitcoin when it was at a low last year? Why didn't they buy Bitcoin when it dropped to over 70,000 in April? From April to now, at most they lost 4 months of annualized 4.5% interest, but what was Bitcoin's increase? Let's say they bought at 80,000 and it rose to 120,000, an increase of 50%. Which is more cost-effective? Do you think this 100 billion, which didn't buy before, will buy at 110,000 or 120,000, helping retail investors? Is it safer to keep it in the bank earning interest, or to buy Bitcoin at 120,000 expecting it to go to 150,000? Large funds are smart; if they didn’t enter at low prices, they certainly won’t enter now.
Another fact that can overturn the viewpoint that interest rate cuts will lead to a surge in Bitcoin is: During the pandemic in 2020 and 2021, central banks around the world were injecting liquidity. Was liquidity good during that time? The Federal Reserve's interest rates were lowered to 0%. Why did Bitcoin only rise to 69,000 then? Will a rate cut to 4% bring it to 150,000?
In yesterday's article, I analyzed very clearly, combining cycles, K-lines, trading volume, and MACD analysis, judging that 120,000 is very likely the peak of this round, and it is highly probable that we are forming a head and shoulders top on a weekly level. Currently, the probability of a significant drop is low; it is just using the anticipation of next month's rate cut to keep people hanging on, ensnaring another wave of investors. If you come across this, you can go back and read it. If you agree with me, please follow me. I have been researching naked K technology for 4 years and share practical market insights daily.
