Recently, friends in the crypto world have been actively discussing the impact of the September interest rate cut on Bitcoin (BTC). Today, let's talk about this matter that everyone is concerned about.
Under the expectation of an interest rate cut, Bitcoin has already shown some signs of strength.
Since mid-August, the market's expectations for the Federal Reserve's interest rate cut in September have been rising, and the price of Bitcoin has skyrocketed, briefly surpassing $124,000, reaching an all-time high. So why does the market expect a rate cut and Bitcoin rises? The reason is simple: a rate cut means more money in the market and lower borrowing costs. This extra money needs to find a place to invest, and high-risk, high-return assets like Bitcoin tend to attract investors' attention. When everyone starts buying Bitcoin, the price naturally rises. It's like a market where suddenly there are more people buying apples; the price of apples will certainly go up. Looking at the previous situation, on September 19, 2024, the Federal Reserve announced a 50 basis point rate cut. As soon as the news broke, Bitcoin quickly surged from around $60,000 to nearly $61,357, and although there was a pullback, it soon broke through the $62,000 mark again. This indicates that Bitcoin is very sensitive to interest rate cut news, and a rate cut can indeed stimulate Bitcoin's price to rise in the short term.
Speculations on Bitcoin's subsequent trends if the September rate cut is implemented.
If the Federal Reserve really cuts rates in September, Bitcoin will likely continue to rise. On one hand, a rate cut will bring more funds into the market. In addition to the aforementioned funds seeking high returns, some funds originally invested in traditional financial markets may also divert some to the Bitcoin market. Because after the rate cut, the returns in traditional financial markets may decrease, while Bitcoin's potential returns are relatively higher, attracting these funds to 'try it out.'
On the other hand, a rate cut will lead to a depreciation of the dollar. Bitcoin is seen as a kind of 'digital gold' to some extent, possessing hedging properties. When the dollar depreciates, investors may buy Bitcoin to preserve and increase their wealth. Just like in real life, if everyone thinks that money is becoming less valuable, they would consider buying assets like gold or real estate to preserve value; the same logic applies to Bitcoin.
However, Bitcoin's price does not just go up. Although a rate cut is a favorable piece of news, many other factors in the market will also affect Bitcoin's price. For instance, changes in cryptocurrency market regulations. If a country suddenly implements strict regulatory policies that restrict Bitcoin trading, even with a rate cut, Bitcoin's price may be suppressed. Alternatively, if there is a large-scale sell-off of Bitcoin in the market, such as major holders suddenly selling off large amounts of Bitcoin, it can also lead to a decline in Bitcoin's price.
How should ordinary investors respond?
For ordinary investors like us, the September interest rate cut is an opportunity but also a challenge. If you want to make some money off the rate cut, you must first manage your risks. Never invest all your money in Bitcoin, as its price is too volatile. You can take a small portion of spare cash for investment, so even if you incur a loss, it won't affect your life.
Secondly, closely monitor market dynamics. In addition to paying attention to interest rate cut news, also watch for other factors that may affect Bitcoin's price, such as regulatory policies, market sentiment, etc. Look at analyses from professionals, but don't blindly follow the trend; have your own judgment.
Finally, you need to have your own trading strategy. If you plan to hold Bitcoin for the long term, then you don't need to worry too much about short-term price fluctuations. But if you want to engage in short-term trading to earn price differences, you need to set your profit-taking and stop-loss points. For example, when Bitcoin's price rises to a certain level and reaches your expected profit, sell decisively to secure your gains; if the price drops to your set stop-loss point, you must also cut your losses decisively to prevent further losses.
The September interest rate cut is an important time point for Bitcoin. Although there is potential for an increase, it also comes with risks. Everyone must be cautious when investing—be cautious, be cautious again, and learn more and analyze more to protect their wallets and earn their share of profits in this market full of opportunities and challenges.
