Is the interest rate cut coming in September? Don't panic in the crypto world, first clarify these 3 potential trends.
As soon as the news of the interest rate cut in September broke, many people in the crypto world couldn't contain their excitement, as if they had already seen the signal for a bull market to take off. But let's not get too excited just yet; we are not unfamiliar with the "operational routines" of the Federal Reserve, and we need to take the time to carefully understand the nuances behind this.
In the short term (1-4 weeks), everyone must maintain a stable mindset and avoid blindly chasing highs. Why do I say this? It’s important to know that once the Federal Reserve officially announces an interest rate cut, it often means that the previously hyped "interest rate cut expectations" have already been realized, and the first reaction of the funds is likely to be "taking profits." Those who have positioned themselves early and bet on the interest rate cut will take this opportunity to withdraw, while many leveraged long positions might directly face liquidation due to market volatility. Looking back at March 2020, after the Federal Reserve cut interest rates, the price of Bitcoin was halved, which is a real "old script" that has happened before; just like in June last year, when the interest rate cut expectations were realized, Bitcoin fell from $42,000 to $36,000 in just three days, causing significant losses for many retail investors chasing highs. If you impulsively enter the market at this time, you might instantly become a bag holder, resulting in a loss that outweighs the gain.
However, from a long-term perspective, this wave of "liquidity" is indeed coming. A rate cut means lower borrowing costs, and the funds in the market will become more abundant, most likely flowing into various markets including the crypto world. Additionally, the high likelihood of ETH ETF approval makes these two factors like the "dual-core engine" of the crypto world, injecting strong momentum into the market. It’s important to note that after the launch of the Bitcoin ETF, an average of 300 million USD flowed in daily, directly driving the price of Bitcoin upward; once the ETH ETF is approved, Ethereum and its ecosystem's staking, L2, DeFi, and other fields are expected to experience explosive growth. At that time, it’s not just a matter of Bitcoin hitting 150,000 USD; the entire crypto world experiencing a "crypto world version of Nasdaq" style prosperity is also not impossible.
Specifically, there may be three possible "scenarios" in the future:
• Best case scenario (probability about 40%): The interest rate cut policy is successfully implemented, and the ETH ETF is officially approved. With the dual positive impacts, the bull market will accelerate, and the price of Bitcoin is expected to surge to $150,000. At that time, market confidence will be greatly boosted, capital will flood in, and various crypto coins are likely to experience a significant increase.
• High probability scenario (approximately 50% chance): Although the Federal Reserve lowers interest rates as expected, the economic data performs poorly, causing fluctuations in the US stock market, which in turn affects the crypto world. In this case, mainstream coins may enter a consolidation phase, while those altcoins lacking real value support are likely to experience a "bloodbath" decline. Just like in 2018, when the US stock market had a sharp correction, the crypto world also suffered, with many altcoins dropping over 90%.
• Worst case scenario (approximately 10% probability): If inflation reignites, the Federal Reserve may take measures to "pause interest rate cuts" or even raise rates. This would undoubtedly be a heavy blow to the crypto world, as evidenced by previous situations, where Bitcoin and other cryptocurrencies could likely see their values halved again. In 2022, due to high inflation, the Federal Reserve raised interest rates consecutively, causing Bitcoin to plummet from $69,000 to $15,000, which serves as a painful lesson.
So what should retail investors do in the face of these possible situations? In fact, the core is just three points:
1. In the short term, definitely do not chase high prices, even if the Bitcoin price reaches 130,000 USD. After positive news is implemented, you should immediately reduce your position; don't be the last one to get on board. Market sentiment changes extremely quickly, and once funds start to withdraw, the speed of price decline may far exceed your expectations.
2. Keep a close eye on the approval progress of the ETH ETF. If approved, consider allocating a portion of funds to ETH and its ecosystem coins (such as OP, SSV, etc.); if the approval fails, you must immediately cut losses and exit, without any hope of a turnaround.
3. Prepare enough "bullets" in advance, and when the market experiences a sharp decline, gradually buy the dip on BTC and ETH. In an era of loose liquidity, these leading coins have broader market consensus and stronger risk resistance, making them relatively the safest choice.
In short, the bull market in the crypto world relies on "water"—that is, sufficient capital liquidity, rather than mere fantasies. The interest rate cut in September is like turning on a tap, and there are many uncertainties to follow. In the short term, there may be a "cutting leeks" market, but in the long run, there might really be a grand performance to come. Everyone must remain calm, don't panic or go "crazy"; if you can hold on, you might just be able to laugh last.