With the approval of Bitcoin ETF this year, Bitcoin has broken through its historical high. The topic of whether Bitcoin can break through $100,000, which has been heated up since the beginning of 2019, has once again become popular. However, in the crypto market, volatility is eternal. After the historical high, investors are waiting for the largest market correction since 2020. The total market value of cryptocurrencies has shrunk from $2.44 trillion on August 2 to $1.99 trillion on August 6, with the largest single-day decline of 8.4%.
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The reasons for this pullback are complex. First, it was affected by the global economy, with Japanese and US stocks plummeting and the Bank of Japan raising interest rates. Secondly, the US economy showed signs of recession, and non-farm employment data was significantly weaker than market expectations. Finally, factors such as the "dumping" of the trading group JUMP and the intensification of tensions in the Palestinian-Israeli region are also affecting the market.
At present, the Fed's interest rate cut expectations, the US election, the global market, geopolitics, etc. will become important factors affecting the future bull market. When the perspective returns to ordinary investors, the phenomenon of "no takeover" has not disappeared, and the crypto market is still waiting for the driving force brought by native innovation. Under various factors, the market will continue to remain volatile.
Is a rate cut still good news?
Although the expectation of interest rate cuts has been stimulating the crypto market, when the rate cuts actually come, everything seems to be a little different. According to CME Fed Observation data, the probability of the Fed cutting interest rates on September 24 has risen to 100%. From a macro perspective, the interest rate cuts will reduce deposit rates and borrowing costs, prompting capital outflows from banks, and investors will be more inclined to high-risk investments such as crypto assets.
However, since the second half of 2022, the expectation of rate cuts has dominated market sentiment and become one of the key catalysts for the surge in Bitcoin prices, so the actual rate cut may only cause a mild market reaction. Bitcoin often rises the most when the Fed pauses its rate hike cycle, but the first rate cut reaction is usually tepid, and if the rate cut is due to economic uncertainty, it may have a negative impact on BTC prices.
Therefore, what is more critical is the background of the interest rate cut. If it occurs in a period of low inflation and economic prosperity, the stimulating effect on asset prices may be more obvious; but if the interest rate is cut when the economy is fragile, it may send a negative signal and cause funds to flow from high-risk assets to safer assets.
Pessimism about the impending recession in the United States is spreading. U.S. job market data released on August 2 showed that the unemployment rate hit its highest level since October 2021, while job growth was lower than expected. The U.S. economy will remain weak in the future, and the impact of interest rate cuts on the crypto market will weaken with the economic background, and the market will continue to fluctuate in the short term.
Since 2008, the United States has started a debt-driven economic growth model, and periodic economic crises are inevitable. However, as long as capital can flow freely, switching from fiat currency to cryptocurrencies such as Bitcoin will remain one of the long-term options for wealth preservation.
How to better seize opportunities
As an emerging market in the global financial market, the crypto market is still full of opportunities as a new technology, although the market trend is increasingly affected by macro factors and volatility may continue for some time.
This round of bull market was initiated by the US Bitcoin ETF and the expectation of a US dollar interest rate cut, and has little correlation with public chains and Altcoin, so there are no truly valuable, highly innovative projects or tokens other than Bitcoin. Tokens without sufficient innovation naturally cannot attract the consensus of global users, and can only promote local consensus through a strong community, so the phenomenon of "no mutual acceptance" has formed on the surface.
At the same time, a market lacking native innovation is susceptible to unexpected events that may cause short-term fluctuations, but under the influence of the above-mentioned monetary easing policies, Bitcoin and Ethereum ETFs, and changes in attitudes of the two major parties in the United States, the market remains bullish in the long term.
If you are an ordinary investor who has a certain understanding of the crypto market and is waiting to see when to enter the market, fixed investment is a good choice in the long run. You can invest a fixed amount of money in a fixed time period to buy a selected currency combination strategy. When the market fluctuates violently, use appropriate fixed investment strategies to buy more chips at low points with the same investment amount to obtain more substantial returns. This strategy is suitable for everyone to a certain extent, especially long-term investors.
In the context of short-term volatility and long-term bullishness, investors should currently control risks reasonably, improve capital utilization efficiency, wait for opportunities, gradually build positions and choose appropriate buy the dips strategies.
