"The Logic of Fund Flow and Market Rise and Fall after the Fed's Rate Cut and the Prospects of Cryptocurrency"
With the gradual implementation of the Fed's rate cut policy, China has launched a large-scale rescue of the market, and global capital has begun to find the best balance between risk and return again. As an international financial center, Hong Kong has attracted a large influx of international funds. The rate cut has reduced the asset yield of the US market, prompting funds to flow to other markets with higher return potential in the world. In the early stage of the rate cut, funds will tend to flow to markets with higher short-term return expectations. The current market situation can be understood as a "fund battle" in the global market for liquidity. In this battle, those markets with higher return potential will first gain the favor of funds, while some markets with lower short-term return expectations may experience capital outflows in the short term. This is also one of the main reasons for the rapid rise of Hong Kong stocks and mainland A-share markets and the recent decline of US stocks and cryptocurrency markets.
Since crypto assets can now be generally considered as US dollar assets, and the current total market value is only more than 2 trillion US dollars, it is not worth mentioning compared with the size of the US and Chinese capital markets. Therefore, as a risky US dollar asset, at this stage, naturally there will be no continuous entry of large funds. However, as the effect of interest rate cuts gradually spreads, investors are looking for diversified investment targets around the world, and the cryptocurrency market is expected to be boosted to a certain extent. This requires global big capital to find the best balance between risk and return, which may take several months.
