The Federal Reserve (Fed) is expected to start a rate-cutting cycle next week, a move that could affect risk assets like Bitcoin. According to 10x Research, a sharp 50 basis point (bps) rate cut could signal concerns about the economy, leading investors to reduce exposure to cryptocurrencies and stocks.
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While traders see less than a 30% chance of a 50 basis point rate cut, Friday’s U.S. jobs report fueled speculation that the Fed could take action. While the Fed’s goal is to reduce economic risks, such a large rate cut could signal heightened concerns about the direction of the economy.
When the Federal Reserve cuts interest rates and global capital liquidity increases significantly, BTC prices continue to rise. Macro liquidity still plays a decisive role in the crypto market.
What do these indicators reveal?
The probability of a 50 basis point rate cut is 29%, which is in stark contrast to the current market consensus. I think the Fed may be behind the curve, especially after the labor market weakness in July.
Impact on risky assets
Bitcoin prices surged on Friday on the news, approaching $60,000 as traders are optimistic that the Federal Reserve could deliver a sharp 50 basis point rate cut at its upcoming meeting. This marks Bitcoin's highest point since early September, when it hit $59,735, up 2.5% on the day. The recent gains follow a reversal of losses in September, when Bitcoin fell to $53,300 following a disappointing August jobs report. Amid concerns about a weakening U.S. economy, traders now expect the Fed's decision could provide a boost to risk assets like Bitcoin. The situation has also fueled an ongoing Bitcoin price prediction discussion.
I think there are two possible outcomes for the next market situation:
First: BTC has formed a head-and-shoulders bottom structure in the current market. The market will still be dominated by fluctuations in the next 20 days. The 25 basis point interest rate cut in September has little impact on the overall market. The market will continue to fluctuate upward, and a major market will start after mid-October.
Second: After the rate cut is implemented, the economic recession is confirmed, and Japan starts to make trouble, there will be a wave of liquidation of deep contracts, and the bottom of 49,000 will be tested again to see if this price can hold up. But I think that once it falls below 52,000, the target will not be 49,000, but the range of 46,000 to 48,000, but it should not last for a long time. This price is mainly for liquidation of contracts.
What should we do now?
Is it a rebound or a reversal? It doesn’t matter. It is important to think about a few questions:
1. If it is a reversal, is the position large enough? If it is not large enough or close to an empty position, how to get on board and at what position to intervene?
2. If it is just a rebound, in the market that is pulling back and forth, should you sell the chips in your hand that are at a relatively low level?
3. The current market is very unfriendly to short-term players, so would it be a better choice to expand the space and time?
Fourth, you must have your own reasonable position management plan, clearly know how much you want to earn in this round, how to roll positions, how to change positions, instead of buying everything you see?
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