Recently, the market seems to have entered a phase that is difficult to decipher, with blue-chip cryptocurrencies maintaining high-level fluctuations, the overall direction is undecided, and the altcoin market has not ushered in the anticipated comprehensive bull market, while DAT assets or coin stocks are leading in the traditional financial market.
Prior to this, there have been many voices on social media characterizing this bull market as driven by traditional funds. This part of the capital has several different characteristics compared to past market cycles, such as being greatly influenced by macro factors, having a lower risk appetite, being relatively concentrated, having a weaker wealth effect spillover, and a less obvious sector rotation phenomenon.
Therefore, when there are significant changes in the macro environment, re-examining these changes will help us make correct judgments. As Powell adjusts the FED's decision-making logic, the performance of the U.S. job market in the short term determines the market's confidence in the September rate cut, which in turn affects the prices of risk assets.
Why is Trump eager for a rate cut?
There are mainly two points: first, to alleviate debt pressure. We know that during the previous Treasury Secretary Yellen's term, the U.S. Treasury's bond issuance structure increased the issuance of short-term bonds, and Basant retained this decision. The benefit of this approach is that short-term bond rates are controlled by the Federal Reserve, reducing the burden of long-term bonds on public finances. From the current situation, the market demand for short-term U.S. Treasury bonds is strong, which helps lower financing costs. However, the problem is also evident: it shortens the duration of the debt, increasing repayment pressure in the short term. This is why recent negotiations regarding the debt ceiling have become more vocal.
A rate cut means lower interest payment pressure from short-term bonds. Second, a rate cut will reduce financing costs for small and medium-sized enterprises, which helps establish supply chains. We know that compared to large enterprises, small and medium-sized enterprises typically rely more on bank debt financing to obtain funds for turnover. Therefore, in a high-interest environment, the willingness of small and medium-sized enterprises to expand financing will be hit. After changing the domestic market competition structure through tariffs, it is also urgent to incentivize small and medium-sized enterprises to expand production and help them quickly fill the gaps in the market supply of goods to avoid inflation. Therefore, Trump's pressure on the Federal Reserve to cut rates at this time is also something he will pursue relentlessly, rather than as a smokescreen.
After Old Powell's speech last week, cryptocurrencies all saw a surge, and the subsequent pullback indicates that the market had already priced in the possibility of rate cuts within the year to some extent. After establishing a new trading logic, the market shifted from initial emotional expectations to rational expectations, so sufficient proof is needed to evaluate the degree of rate cuts.
As for how deep the pullback will be, I think the recent performance of ETH, which has been the hottest, is worth paying attention to. As long as the price does not break below this upward channel in the short term, it indicates that investor sentiment has not shown a significant reversal, so the risk is manageable.
Today's fear index is 50, maintaining a neutral state.
Yesterday, two data points from the U.S. showed that the economic situation is still quite good, which may have reduced the basis for rate cuts, leading to some fluctuations in the cryptocurrency market. BTC has slightly stabilized at 112,000, while ETH is still hovering around 4,500 USD.
Tonight, the U.S. will announce GDP and core PCE data, among which core PCE is one of the important indicators for the Federal Reserve's assessment of interest rate adjustments. This is an index measuring the price level of personal consumption expenditures, in other words, an indicator measuring inflation. Therefore, it is expected that the market will pay attention to this data tonight. If it is higher than expected, the market trend will be hit, as there have been unfavorable economic data for rate cuts for two consecutive days.
