Recently, discussions about the Federal Reserve's rate cut in September have become rampant in the market, and friends in the crypto world are especially excited, as if the horn of the bull market has been sounded. But don't rush to cheer; haven't we seen the tricks of the Americans before? At this critical moment, maintaining calm and rationality is key to surviving in the crypto world. Today, let's talk about where the crypto world will head with the rate cut in September.
Short term (1-4 weeks): I advise you to stay steady, don't chase high prices.
Once the Federal Reserve cuts rates, it seems like a significant boon, but often when the good news materializes, it is also a time of market upheaval. From past experiences, the first reaction of funds is likely to be 'cashing out for safety'. Those who speculated on the rate cut will quickly withdraw, and leveraged long positions will face significant liquidation risks.
Do you remember the interest rate cut in March 2020? After the Federal Reserve drastically cut rates, the price of Bitcoin not only did not rise but was halved instead. At that time, the market expectations were extremely optimistic, with a large influx of capital, but after the interest rate cut news landed, the market turned instantly, and countless investors lost everything. This is a typical case of 'good news turning into bad news'; the lessons of history should not be ignored. If you get carried away and buy high at this moment, you may instantly become a high-priced bag holder, ruthlessly harvested by the market. Therefore, in the short term, it is essential to maintain a steady mindset and not be swayed by the market's frenzy. Mid to long term: With ample liquidity, the crypto world may welcome a 'dual-core drive'. Although there are risks in the short-term market, from a mid to long-term perspective, this interest rate cut may indeed bring a significant market upturn for the crypto world. A rate cut means lower capital costs, and money in the market becomes 'cheaper', which will prompt a large amount of capital to seek new investment outlets. In the crypto world, especially mainstream cryptocurrencies like Bitcoin and Ethereum, due to their unique attributes and potential high returns, they are very likely to become the direction for capital inflow.
More crucially, the ETH ETF is highly likely to be approved during this period. If this comes true, it will form a 'dual-core engine' for the crypto world alongside the interest rate cut. We can refer to the performance of the Bitcoin ETF, which saw an average daily inflow of $300 million after its approval, greatly boosting Bitcoin's price. As a representative of blockchain 2.0, Ethereum has a richer ecosystem covering multiple hot areas like staking, L2, and DeFi. Once the ETH ETF goes live, these related fields will experience explosive growth, and it is not impossible for Ethereum's price to hit higher levels. It may even drive the entire crypto world to reach the heights of the 'crypto version of Nasdaq', with Bitcoin's price breaking through $150,000 not being a mere fantasy. Three scenarios: Knowing the best scenario in advance (40% probability): Rate cut + ETH ETF landing, bull market acceleration. If the Federal Reserve successfully cuts rates in September and the ETH ETF can truly land, it will undoubtedly be a major boon for the crypto world. The influx of capital and the boost in market confidence will accelerate the bull market. Bitcoin is expected to charge towards $150,000, and Ethereum and other mainstream coins will also rise with the tide. The entire crypto world will be immersed in prosperity, and various cryptocurrency-related projects will flourish. Likely scenario (50% probability): Rate cut but poor economic data, market fluctuations. In this case, although the Federal Reserve's rate cut releases liquidity, if U.S. economic data still performs poorly, the stock market and crypto world may fall into fluctuations together. Mainstream coin prices may exhibit a sideways consolidation trend, while altcoins, due to their inherently high-risk nature, may suffer heavy losses amidst market uncertainty. Investors will find it extremely difficult to operate in such a market; chasing highs and cutting losses could easily lead to losses on both sides. Worst-case scenario (10% probability): Inflation rebounds, Fed pauses rate cuts. If inflation unexpectedly revives after the rate cut, and the Federal Reserve has to 'pause rate cuts', then the crypto world will be in serious trouble. Market expectations will be completely disrupted, and the prices of mainstream coins like Bitcoin may be halved again, plunging the crypto world back into a cold winter. In such extreme circumstances, investors' assets will significantly shrink, and many cryptocurrency projects will face survival crises.
In short, the arrival of a bull market in the crypto world often relies on the push of market funds. The rate cut in September is like turning on a faucet; although there may be risks of being harvested in the short term, in the long run, it is indeed possible to stage a grand market upturn. As investors, we must remain calm, not panic or go mad, and endure the market's fluctuation period to laugh last in this crypto feast.
