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The collision between market expectations and policy truth is imminent, and the frenzy and anxiety of the cryptocurrency market are intertwined at this globally anticipated turning point in monetary policy.
At 2:00 am Beijing time on September 18th, the Federal Reserve will announce the results of its September interest rate decision. The market generally expects the Federal Reserve to initiate its first interest rate cut of the year, with a magnitude of 25 basis points. This resolution is not only related to interest rate adjustments, but will also release a new "dot matrix chart" to reveal officials' predictions on the future path of interest rates, which will become a key basis for the market to judge the direction of subsequent policies.
Market expectation: 25 basis points of interest rate cut have been digested
According to the Chicago Mercantile Exchange's (CME) FedWatch tool, the market's expected probability of a 25 basis point rate cut by the Federal Reserve at this meeting is as high as 96.4%. This expectation has been largely digested by the market, indicating that investors generally believe that the Federal Reserve will take action.
Out of 107 economists surveyed by Reuters, 105 predict that the Federal Reserve will lower interest rates by 25 basis points this week to 4.00% -4.25%. The main triggering factor for the expected shift is the significant deterioration of the US job market.
In August, the non farm employment data only added 22000 jobs, far below market expectations, and the unemployment rate unexpectedly rose to 4.3%.
Historical experience shows that Bitcoin often reacts in advance before monetary policy easing, exhibiting the characteristic of "expectation driven rise". IG analyst Chris Beauchamp pointed out, "If the Federal Open Market Committee suggests that this week's meeting is just the beginning of more interest rate cuts, then cryptocurrency should continue to be one of the main beneficiaries
Market data shows that about 81% of IG customers hold a bullish stance on Bitcoin, and 83% of customers are also optimistic about Ethereum. This optimism is based on the expectation that interest rate cuts may lead to more capital flowing into risky assets.
【 03 Potential Risks: Beware of the 'Sell Fact' callback 】
Andrew Tyler, head of market intelligence at JPMorgan Chase, warns investors that even if the Federal Reserve announces a rate cut as expected, the market may still trigger profit taking selling pressure due to positive news settling. This kind of market behavior of "buying expectations and selling facts" is not uncommon in history.
The cryptocurrency market has shown signs of increased volatility. In the past 24 hours, more than 120000 people have liquidated their positions in virtual currencies, with a total liquidation amount of 167 million US dollars across the entire network, including 113 million US dollars in multiple liquidation orders. This indicates that the market has a high leverage ratio and significant vulnerability.
【 04 Dot Matrix Diagram Guide: The Future Path is More Important than the Present 】
The real suspense of this meeting is not whether to cut interest rates, but what kind of future interest rate path the Federal Reserve's latest "dot matrix" will imply. The dot plot may reveal three major pieces of information: the forecast for long-term neutral interest rates, the path of interest rate cuts in 2025, and the dispersion of interest rate forecasts for 2026.
Bai Xue, Senior Deputy Director of Research and Development at Dongfang Jincheng, stated that if the median rate of interest rate cuts shown in the dot plot is raised from the 50 basis points predicted in June to 75 basis points, it will strengthen market expectations of easing. This expectation may provide more lasting support for the cryptocurrency market.
If the dot plot shows a more dovish path of interest rate cuts, it may provide new upward momentum for the market. On the contrary, if the Federal Reserve is cautious, the market may be disappointed and experience a pullback.
The cryptocurrency market has experienced a $167 million sell-off in the past 24 hours. The market leverage ratio is high, and regardless of the outcome of interest rate cuts, drastic fluctuations may follow.
In the coming hours, global investors' attention will be focused on the Federal Reserve's decision and every hint of future policy from Powell's press conference. The cryptocurrency market is about to experience a major shock, investors need to fasten their safety belts.
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Disclaimer: The above content only represents the author's personal opinion and is intended to assist investors in understanding information related to the capital market. It does not constitute any investment advice and does not represent the position or viewpoint of AiCoin. The market is risky and investments should be made with caution.
