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Author: OMKAR GODBOLE, CoinDesk; Compilation: Deng Tong, Bitchain Vision Realm
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The inflation report last Thursday may laid the foundation for the Federal Reserve to start interest rate cuts this year.
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Although the cryptocurrency community is expected to cut interest rates for the first time, it will trigger the Bitcoin bull market, but its reaction depends on the background of the central bank’s relaxation policy.
After the release of the inflation report yesterday, the Fed seems to be more and more likely to start rate cuts this year to meet the long -term desire for cryptocurrencies for a long -term risk to affordable macroeconomic environment.
The consensus of the cryptocurrency market community is that interest rate cuts (maybe starting in September) will increase the demand for high investment in risks such as Bitcoin (BTC).
Although it makes sense, the market may have digested any easing policies.Since the second half of 2022, interest rate cuts are expected to dominate the emotions of cryptocurrencies and traditional markets. It is also one of the key catalysts of Bitcoin from nearly $ 15,000 in 2022 to a historical high of more than $ 73,000 this year.therefore,Actual interest rate cuts may only cause a cold response in the market.
More importantly may be the background of interest rate cuts.
If interest rate cuts occur during low inflation and economic prosperity, the stimulus effect on asset prices may be more obvious.Settlement in the appearance of signs of economic fragility may issue negative signals, prompting investors to transfer funds from higher risk assets to more secure assets such as government bonds.
10X Research founder Markus Thielen stated in a report shared with CoinDesk: “If the Federal Reserve in September 2024 is only due to inflation, this may be short -term for Bitcoin.” “However, if economic growth is concerned about concernsPromoting interest rate cuts, whether in September or later, Bitcoin may face huge selling pressure. “
Thielen said, from a historical point of view,When the Fed suspended the interest rate hike cycle, Bitcoin increased the greatest.The first rate of interest rate cuts usually cause tepid reactions.
“In the Federal Reserve’s suspension of interest rate hikes until July 2019, Bitcoin experienced explosive growth, with a return rate of+169%. After seven months of suspension in 2019, the Federal Reserve cut interest rates and opened a sharp interest rate cut.The currency response rose+19%within one week after the interest rate cut on July 31, 2019.
Thielen added that the interest rate cut in the second half of 2019 was due to economic uncertainty and dragged the price of BTC.CoinDesk data shows that the price of cryptocurrencies fell 33%in the second half of the year.
The US stock market also shows similar models.
According to MarketWatch, Austin Pickle, a strategist in the Institute of Institute of Wells Fargo, said last month: “The arrival of the Federal Reserve’ s interest rate reduction cycle is consistent with the stock market sharply. “About 20%””
Pickle added,If the Fed is forced to cut interest rates to cope with macro weakness, the stock market will be affected.
This means that cryptocurrency traders should be alert to signs of weak US economy.
According to the Fidge’s commercial cycle tracker, the US economy was in the late stage of expansion at the end of the second quarter.Leading indicators such as new orders and materials for consumer goods and materials, consumer confidence, and architectural permits indicate the weakness of the future.If the weakness becomes more obvious in the next few months, interest rate cuts will not help risk assets including BTC.
