The Federal Reserve resumed interest rate cuts after a year. Can the crypto bull market reach new highs?

Shaw, Golden Finance. Early this morning, the Federal Reserve cut interest rates by 25 basis points as expected, lowering the target range for the federal funds rate to 4.00% to 4.25%. This is the first rate cut by the Fed this year. The FOMC statement highlighted the current state of the US economy, including slowing job growth, a slight increase in the unemployment rate, increased downside risks to employment, and a shift in the balance of risks. This rate cut was long anticipated, and now that it's in place, the market is beginning to see its impact. What will be the outlook, and how will it impact the cryptocurrency market? The Federal Reserve cut interest rates by 25 basis points, as expected by the market, and may cut twice more this year. Following its FOMC meeting on Wednesday, September 17th, the Federal Reserve announced a 25 basis point reduction in the target range for the federal funds rate, from 4.25% to 4.5% to 4.00% to 4.25%. This was the Fed's first rate cut this year. The Fed cut interest rates three times between September and December of last year, bringing the total rate cuts this cycle to 125 basis points. This rate cut was widely anticipated. At the close of trading on Tuesday, Chicago Mercantile Exchange (CME) futures markets were pricing in a 96% probability of a 25 basis point rate cut this week, an 80% probability of a further rate cut at the next meeting in October, and a nearly 74% probability of a further rate cut in December. U.S. Treasury Secretary Benson also stated that the market is pricing in a total of 75 basis points in interest rate cuts between now and the end of the year. At this FOMC meeting, new Fed Governor Milan, a strong Trump pick, dissented from the 25 basis point rate cut, preferring a 50 basis point cut. Two other Fed Governors, Bowman and Waller, did not vote for the 50 basis point cut, both supporting a 25 basis point cut. They both dissented from the previous July meeting, favoring a 25 basis point cut. Governor Cook, whom Trump had previously sought to remove, voted in favor of a 25 basis point rate cut, and the market had expected her to take a more hawkish stance before the meeting. The median Fed rate cut forecast indicates that the central bank expects three rate cuts this year, one more than the previous one, meaning that after this cut, there will be two more rate cuts this year. The dot plot shows that nine people expect two more rate cuts this year, less than half of the respondents, six expect no rate cuts this year, and one person predicts five rate cuts, for a total of 150 basis points this year. The FOMC statement emphasized that downside risks to employment have increased. The wording of the FOMC statement on economic data has been adjusted compared to the July statement. The July statement mentioned that "fluctuations in net exports have affected the data, but recent indicators show that economic growth has moderated in the first half of the year." This statement only retains the second half of the sentence, reiterating that "recent indicators show that economic growth has moderated in the first half of the year." The FOMC statement did not reiterate that the US unemployment rate remains low and the labor market is solid. Instead, it adjusted the statement to state that "job growth has slowed, the unemployment rate has risen slightly but remains low, and inflation has increased but remains moderately elevated." The statement stated that the FOMC is focused on the two risks to achieving its dual mandate of maximum employment and price stability, and also added a judgment that downside risks to employment have increased. The FOMC statement also mentioned that the decision to cut interest rates was made "in light of a shift in the balance of risks." Furthermore, the FOMC statement reiterated that the Federal Reserve will continue to reduce its holdings of US Treasury bonds, agency bonds, and agency mortgage-backed securities (MBS). Powell: There is no 'risk-free path' for monetary policy. Federal Reserve Chairman Powell stated at a press conference that the U.S. unemployment rate remains low but has risen slightly, job growth has slowed, and downside risks to employment have increased. Job growth has slowed significantly, reflecting a decline in immigration and a decline in the labor force participation rate. The slowdown in U.S. GDP growth primarily reflects a slowdown in consumer spending. Inflation has recently risen but remains somewhat elevated. Regarding tariffs, Powell stated that the overall impact of tariffs on inflation remains to be seen. The baseline scenario is that the impact of tariffs on inflation is short-lived. The risk of persistent inflation needs to be managed. The balance of risks has shifted, with employment facing downside risks. Inflation risks are tilted to the upside. Ability to respond promptly. During the Q&A session at the press conference, Powell stated that there was no broad support at this week's meeting for a larger rate cut, perhaps 50 basis points. The Fed has made very large rate hikes and cuts over the past five years, typically when policy was clearly misaligned and a rapid adjustment to a new level was necessary. Powell said the current rate cut was a risk management decision, adding that he did not see the need for a rapid adjustment in interest rates. Regarding the Fed's monetary policy, Powell emphasized that the Fed faces a difficult and unusual situation: a weakening labor market coupled with persistently high inflation. Typically, a weak labor market would warrant lower interest rates, while rising inflation would require a tighter policy stance. Powell said monetary policy faces a situation where "there are bilateral risks and there is no risk-free path." Powell also said he is firmly committed to the independence of the Federal Reserve.

The impact of the interest rate cut has gradually begun. What will the future market trend be?

The impact of this interest rate cut on the market has begun. After the Federal Reserve announced its resolution, major global assets have fluctuated to varying degrees, and major crypto assets have also begun to rise. US stocks saw mixed gains and losses after volatility. The Nasdaq index briefly fell 1% intraday, but later recovered most of its losses, while the Dow Jones Industrial Average rose. US Treasury yields rose after volatility, recovering the losses since the Fed announced the rate cut. Gold fell after volatility. The US dollar briefly fell before rising, significantly higher than before the decision was released. Bitcoin briefly dipped after the Fed's decision, but then began to rise, currently trading around $118,000. Ethereum also saw significant gains after the rate cut announcement, currently trading around $4,600. What impact will the Fed's rate cut have on the market, and how will the crypto market perform? Let's take a look at the market's views and analysis. 1. Anthony Pompliano, founder of Professional Capital Management, stated in a post that he believes Bitcoin will continue to rise before the end of the year. The Fed's interest rate cut will bring cheap capital to assets like Bitcoin. The Bitcoin bull market is not over yet. 2. BitMine Chairman Tom Lee, in an interview with CNBC, stated that the biggest beneficiaries of the Fed's rate cut will be: the Nasdaq 100 Index (Mag7 + AI sectors); Bitcoin and Ethereum are likely to see significant gains over the next three months; and small-cap stocks and financial sectors. 3. Matrixport published a chart analysis showing that since November 2023, money supply indicators have closely aligned with Bitcoin's price movements, reflecting expectations of a weakening US dollar and expanding global liquidity. While this correlation is a useful signal, it is more of a proxy for market sentiment than a reliable driver. However, it still points to the possibility of further Bitcoin gains, despite history showing cyclical nature. With the Federal Reserve cutting interest rates, the dollar is likely to weaken, which would boost liquidity and support Bitcoin prices. Dan Morehead, founder of the crypto fund Pantera Capital, told CNBC that Bitcoin still represents a very small portion of global wealth. So I think it could reach $750,000 within four or five years. According to crypto analyst @ali_charts, Bitcoin (BTC)'s seller risk ratio has just fallen below 0.1%. This level typically signals a local bottom, an accumulation phase, and low selling pressure. 6. Bitfinex Alpha reported that Bitcoin broke a three-week losing streak last week and reclaimed the key support level of $112,500 after holding the range low of $107,500. The cost basis distribution heat map shows significant dip buying around $108,000, while a supply cluster between $110,000 and $116,000 currently defines the short-term range. The total cryptocurrency market capitalization rose 4.8% last week to $3.97 trillion, reflecting cautious but sustained accumulation. Despite persistent volatility, both BTC and the broader market appear to be stabilizing and could see a recovery once resistance levels are broken. 7. David Kelly, Chief Market Strategist at JPMorgan Asset Management, sees signs of a gradual slowdown in the US economy, which he expects will put pressure on cyclical sectors such as manufacturing and retail. He said lowering the benchmark interest rate is unlikely to reverse this situation.

8. Matrixport published a chart stating, "In the easing environment of the Federal Reserve's rate cuts, concerns about 'good news cashing out' are unlikely to hold true. Instead, it is more likely to drive the bull market to continue. Monitoring shows that the market has already priced in more than three rate cuts. This round of easing expectations may provide momentum for Bitcoin to reach new highs."