Let's review the historical impact of the Fed's interest rate cuts on the Crypto Assets market and based on this, forecast the possible trends of the current cycle.
1. Historical Trend Review
1. Interest Rate Cuts in 2019: Anticipation Precedes, Implementation Differentiates In 2019, the Fed conducted three interest rate cuts, each reducing by 25 basis points. Under the stimulus of this loose policy, Bitcoin reacted in advance to liquidity expectations, rising from $3,800 to $13,000 before June. However, after the actual interest rate cuts were implemented, the market entered a profit-taking phase, and Bitcoin fell below $7,000 by the end of the year. This indicates that policy expectations are often priced in ahead of time, and caution should be exercised for volatility corrections when officially announced.
2. 2020 Interest Rate Cuts: Panic Hits Bottom, Liquidity Fuels Bull Market In 2020, in response to the pandemic, the Fed urgently cut interest rates by 150 basis points and launched quantitative easing, bringing rates back to near zero. The market's initial reaction was a panic sell-off due to liquidity tightening—the "312" event saw Bitcoin plummet to $3800. However, as liquidity surged into the market, it quickly rebounded in a V-shape and ultimately initiated an epic bull market. Bitcoin reached a new high of $69,000 in November 2021, while Ethereum rose from a low of $90 to nearly $4,800.
2. Market Predictions for This Round of Interest Rate Cuts
Currently, the market generally expects the Fed to cut interest rates by 25 basis points, which has become a consensus. Historically, interest rate cuts do not necessarily directly boost coin prices; rather, they tend to work indirectly by changing capital flows and market sentiment. The following points are worth noting:
· Beware of "Buy the Rumor, Sell the News" While interest rate cuts are generally favorable for risk assets, it is important to note the potential for short-term selling pressure after the policy is implemented. In 2019, Bitcoin corrected over 15% within a week after the announcement of an interest rate cut. The current market has partially priced in expectations, and one should guard against a technical pullback after the good news materializes.
· Mainstream coins or more favored by funds. Bitcoin and Ethereum, as the cornerstones of the crypto market, are likely to become the preferred allocation objects for institutional funds. The ongoing promotion of Bitcoin spot ETFs, as well as Ethereum's staking yields and Layer 2 ecological progress, add extra appeal to them. If traditional financial markets come under pressure again due to debt or inflation, crypto assets are expected to become a new generation "asset safe haven."
· Beware of the saying "good news is fully priced in". After the policies are clarified, the market attention may shift back to the fundamentals. Whether the upward trend continues still needs observation of whether the macro environment truly warms up and whether new funds enter in large amounts. Historical cycles remind us that overly relying on a single event for speculation is often less stable than sustained capital inflows and ecological construction support.
In summary, the Fed's interest rate cut is beneficial for crypto assets in the medium to long term, but short-term fluctuations are inevitable. It is advisable to view policy events rationally, seize structural opportunities, and always maintain a risk awareness.