The Federal Reserve announced at 2 a.m. Beijing time on the 19th that it would cut the benchmark interest rate by 0.5%, initiating the first rate cut since 2020. The cryptocurrency market then began to rise, with Bitcoin briefly breaking through $61,320 before quickly falling. However, after regaining its footing at $60,000, Bitcoin started a rapid rise after six this morning, rising to a high of $62,555. As of the time of writing, the price was $62,687, up nearly 4.12% in the past 24 hours, setting the highest price since the end of August.

Is the interest rate cut really beneficial to cryptocurrencies?

Generally speaking, interest rate cuts will be beneficial to safe-haven assets, and as time goes by or interest rates continue to cut, market liquidity will flow into gold and cryptocurrencies. However, looking back at history, after the Federal Reserve launched its first interest rate cut in many years in September 2019, Bitcoin did not rise in the short term. Instead, it fell 13.54% that month, from $10,000 to around $8,300, because the interest rate cut was initiated to save the economic recession.

The figure below is a trend chart of the US S&P 500 index and the US benchmark interest rate since 1980. We can see that during the COVID-19 pandemic in 2020, the financial tsunami in 2008, and the Internet bubble in 2000, the index fell synchronously with the interest rate.

The reason for such performance is that the Federal Reserve started to cut interest rates at that time because of the more serious economic recession problem, which forced the Federal Reserve to loosen its money supply. However, this is not good news for the investment market in the long run.

What is the reason for the Fed’s interest rate cut this time?

Next, follow me to understand the reasons why the Federal Reserve cut interest rates by 2 basis points. Half an hour after the latest interest rate decision was announced, Federal Reserve Chairman Powell held a press conference on monetary policy. Powell emphasized in the press conference: "This is a preventive measure aimed at maintaining a sound economy and labor market. It does not mean that a recession is approaching or that the job market may collapse." This has reduced market concerns about a recession and increased the possibility of a soft landing.

According to the Federal Reserve’s latest interest rate dot plot, the Fed will cut interest rates by a total of 2 basis points in the last two meetings in November and December this year. It may be that the interest rate will be cut by 1 basis point in each of these two meetings, or there may be one meeting in which the interest rate will not be cut and another meeting in which the interest rate will be cut by 2 basis points directly. (This sentence is a bit nonsense)

At the same time, as can be seen from the chart, there will be four more interest rate cuts in 2025 and two in 2026, which means that the end point of the interest rate cut may fall in the range of 2.75%-3.0%, although Bao pointed out that future interest rate levels are unlikely to return to the ultra-low level before the epidemic.

Bitcoin daily chart

According to the daily chart of Bitcoin, the price of Bitcoin shows signs of breaking through the upper track. If the price effectively breaks through and stabilizes on the upper track, then the price of Bitcoin will have room for further increases. If it encounters resistance on the upper track and cannot break through, it may pull back downward to continue looking for opportunities. The DIF line and DEA line in the MACD indicator form a golden cross above the 0 axis, indicating that the current market bullish sentiment is strong. The three KDJ line values ​​are all above 80 and in the overbought area. If the J line value shows signs of turning downward, it means that the price may pull back downward. The RSI value is 73, which is also in the overbought area, and it also verifies the strong market sentiment, but we need to be wary of the risk of short-term resistance and pullback.

Bitcoin 4-hour chart

According to the Bitcoin 4H chart, the price is near the upper Bollinger Band, and the price has briefly broken through the upper band before, which shows that Bitcoin is in an upward trend. The DIF and DEA in MACD are running above the 0 axis, showing a strong bullish trend. The MACD red bar chart is also gradually increasing, further indicating the strong bullish trend. The KDJ three-line value is higher than 80 and is in the overbought area. There may be pressure for a callback in the short term. If a dead cross is formed at a high level, the callback depth will be lower. The RSI value of 78 also shows that it is currently in the overbought area, and it is also necessary to be vigilant about the risk of encountering resistance and callback.

In summary, the following suggestions are given for reference

If Bitcoin falls back to 62,000, go long with a light position, and if it falls to 61,600, go long with an additional position. The target is 63,300-64,000, and the defense is 61,400.

It is better to give you a correct idea and trend than to give you a 100% accurate suggestion. After all, it is better to teach a man to fish than to give him a fish. Suggestions can make money for a while, but ideas can make money for a lifetime! What matters is the idea, the grasp of the trend, the layout of the market and the position planning. All I can do is to use my practical experience to help you so that your investment decisions and business management will go in the right direction.

Writing time: (2024-09-19,19:40)

(Text - Daxian Shuobi) Hereby declare: There is a delay in online release, and the above suggestions are for reference only. The author is committed to research and analysis in investment fields such as Bitcoin, Ethereum, altcoins, foreign exchange, and stocks. He has been involved in the financial market for many years and has rich experience in real-time operations. Investments are risky, and you need to be cautious when entering the market. For more real-time market analysis, please pay attention to Daxian Shuobi, a Chonghao account, to discuss and communicate together. #美联储宣布降息50个基点 #加密市场反弹 $BTC