How is the situation of the good news being realized? Will Bitcoin reproduce the trend of 2022? Can altcoins take on liquidity?

Author: Joyce

Editor: Zhang Wen

Tonight is another day that will go down in financial history. The Fed's rate cut seems to be a foregone conclusion, and the discussion is no longer about whether there will be a rate cut, but rather the magnitude of the cut.

Financial institutions such as Bank of America, Goldman Sachs, Morgan Stanley, Barclays, and Citibank have all predicted that the Fed will cut rates by 25 basis points tonight, but a more aggressive rate cut is also possible. The probability of a 50 basis point rate cut in September on the CME "Fed Watch" is 61%.

So the question for us now is how the rate cut will affect the price of Bitcoin.

BlockBeats has compiled some noteworthy viewpoints for readers to refer to, so let's wait and see tonight.

Different Environment, Optimistic Attitude

Hedge Fund Sky Bridge Founder Anthony Scaramucci

Hedge Fund Sky Bridge founder Anthony Scaramucci said in an interview on Wednesday that the Fed may cut rates by 50 basis points tonight, which is part of at least 150 basis points of cumulative rate cuts over the next 18 months. He believes that this is good for asset prices in the United States and globally. With a series of rate cuts by the Fed and clearer cryptocurrency regulations in the United States, Bitcoin will reach a new high of $100,000 by the end of the year.

Scaramucci stated that in the early stages of the next term of the U.S. Congress, some legislation supporting cryptocurrencies, Bitcoin, and stablecoins will be passed, legislation that is supported by both the Democratic and Republican parties. At the same time, he is optimistic about the prospects of the Harris administration's cryptocurrency regulations, as an advisor to her campaign team has indicated that Harris will support measures to help the industry develop while maintaining appropriate safeguards.

Zach Pandl, Research Director at Grayscale Investments

Zach Pandl, research director at Grayscale Investments, said in an interview with Forbes two weeks ago, "In the context of a soft landing, a rate cut is quite unfavorable for the dollar, but it is favorable for assets such as Bitcoin. Taking these factors into account, the market will explore historical highs again in the coming months."

However, Zach Pandl also stated that if the unemployment rate continues to rise and signs of layoffs emerge, "we may see a period of economic weakness, during which many assets such as Bitcoin and tech stocks will weaken in a typical cyclical manner." Zach Pandl believes that the period of economic recession will be an excellent time to accumulate Bitcoin, as the market is likely to see loose monetary and fiscal policies in the future, just as it did during the pandemic. However, if the U.S. labor market continues to deteriorate and the U.S. economy experiences a brief recession, Bitcoin may face downward price risks in the next 6 to 12 months. These are the main risks we face in the next 6 to 12 months.

Reproducing the 2022 Rate Cut Trend?

Jake Ostrovskis, OTC Trader at Wintermute

OTC trader Jake Ostrovskis of Wintermute stated in an interview with Decrypt that a rate cut will mark a "shift" in monetary policy and may boost cryptocurrencies. "Historically, this increases the liquidity of the financial system, which is often beneficial for risk assets such as Bitcoin," in other words, the more risk-taking investors there are, the more funds they are willing to invest in this area, which may lead to an increase in the prices of digital assets.

Crypto Rover, Founder of CryptoSea

Crypto Rover, founder of CryptoSea, believes that the Fed is expected to cut rates by 50 basis points within 24 hours and is optimistic about the future development of Bitcoin. "The last time this happened, the bull market for Bitcoin began."

Lark Davis, Founder of Wealth Mastery

Lark Davis, founder of Wealth Mastery, also predicted the impact of this rate cut by combining the trend of Bitcoin during the Fed's rate cut in 2022. "The last time the Fed cut rates, Bitcoin showed an upward parabolic trend, and if history repeats itself, the next 6-12 months will be crazy."

Trader Ahmed@CryptoBheem

Trader Ahmed also believes that the rate cut will be favorable for the rise of Bitcoin, but the realization process will be more tortuous. He predicts that in the case of a 50 basis point rate cut, the market may experience drastic fluctuations, and after a 25 basis point rate cut, the market will experience a short-term decline before beginning to recover its upward trend. "If (the Fed cuts rates by) 50 basis points, I will sell all (the Bitcoin I hold)."

Altcoins Will See Upside Potential

Arthur Hayes: The market will collapse after the rate cut and then enter a bull market, and ETH will perform strongly during the rate cut cycle

BitMEX co-founder Arthur Hayes stated during the "Thoughts on Macroeconomics Current Events" keynote speech at the TOKEN2049 main venue on the first day:

When the Fed cuts rates at a time when the U.S. government is spending the most money, it is a huge mistake. When inflation exceeds their target and real GDP growth has exceeded 2% for about 8 to 9 quarters, the situation becomes even more complicated. So, although many people expect a rate cut to drive the stock market and other markets higher, the reality is different. I believe the market will collapse a few days after the interest rate adjustment, as this will narrow the interest rate differential between the dollar and the yen.

I want to list some winners and losers in the changing interest rate environment due to the decline in Treasury rates, as well as the interest income that can be generated by holding the safest legal assets. Winners include ENA, ETH, ETHFI, and PENDLE, of which I personally hold a large amount, but I do not hold ONDO. The investment portfolio of Maelstrom (his family office) is very suitable for an environment of falling interest rates.

Many people believe that Ethereum has made no progress in this round. During the bull market in the past few months, Solana has performed very strongly. The main argument for Ethereum is that it is an internet bond, a 4% yield internet bond. So why would I invest in this bond when the government bond yield is higher than this level? But if government bond yields quickly decline, then investing in ETH becomes profitable. The returns from Ethereum will exceed the returns from the dollar and government bonds. The Fed will cut rates, the market will collapse, and then reignite the bull market.

Trader Noodles

Trader Noodles believes that a rate cut usually increases liquidity in the market, and a rate cut will cause the dollar to depreciate, leading to a decline in the Dollar Index (DXY). Dollar depreciation usually makes dollar-denominated assets more attractive. Investor risk appetite may increase. Investors may turn to risk assets such as stocks and cryptocurrencies in search of higher returns.

But Noodles' view is more aggressive. He believes that "rate cut -> Dollar Index (DXY) falls -> increased risk appetite -> decline in Bitcoin market dominance -> ETH/BTC rebound -> altcoin rebound". When there is increased interest in risk assets in the market, investors may move funds from major cryptocurrencies such as Bitcoin to other assets, leading to a decrease in Bitcoin's overall market share. As funds flow into Ethereum and other mainstream altcoins, more funds will also flow into other altcoins. As a result, the overall altcoin market may experience a rebound, and the ETH/BTC trading pair will also rebound.

Michaël van de Poppe, Founder of MN Consultancy

Michaël van de Poppe, founder of MN Consultancy, believes that the Fed may initially cut rates by 25-50 basis points. If this happens, Bitcoin will continue to rise to $65-68K, and the rate cut will also benefit DeFi, thereby boosting the rise of ETH. Despite the current poor chart of ETH, after the rate cut, "ETH will also do something".

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