The interest rate cut is coming. Is it really good for the market?

0xTodd

24-09-10 11:00

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Original author: 0xTodd, Ebunker co-founder

Editor's note: On September 18, the Federal Reserve will hold a meeting on interest rates. The long-awaited interest rate cut is finally about to begin. The Federal Reserve's interest rate cut is usually a major positive for risky assets and will bring huge liquidity to the market. However, Ebunker co-founder 0xTodd put forward a different point of view. He believes that the short-term effect of the interest rate cut may not be conducive to the short-term investment of crypto assets. BlockBeats reproduces the full text as follows:

I have an unverified idea: Before the interest rate cut, especially the closer it is to the interest rate cut, the more funds are withdrawn from the risk market.

For example, now, regardless of the coupon rate, the medium- and long-term US Treasury yields have dropped from the peak of 4.5-5% to the current 3.5%-4%. If the official announcement of the interest rate cut is made, or even a series of interest rate cuts are started, the actual yield will naturally go down, which will be reflected in the increase in the price of the bonds themselves.

(Possible) Some funds in the market think:

Now is probably the last window to increase the position of US bonds, locking in 4% of US dollars, and once locked, it can be locked for 10 or even 30 years, the interest rate is still very attractive.

Then these funds can only desperately withdraw from the risk market during this time window (August-September), causing the darkness before dawn in the market.

The interest rate cut is a milestone event. Before the interest rate cut, there is no sense of urgency, and everyone is thinking about continuing to make a profit in the risk market. Only when the interest rate cut is approaching, the mentality of "hurrying to catch the last bus" begins.

Therefore, when the interest rate cut is approaching, not only does it not have the imagined price in increase effect, but we will feel that liquidity has been decreasing.

By the time the official announcement of the rate cut began, the funds that should have left had already left. Those who stayed behind were obviously waiting for the party to begin.

PS: Of course, investors in the crypto market seem to have a much different risk appetite than U.S. bond investors, and the user profiles may not match, so this is an untested idea.

Crypto Yihang Comments:

Crypto KOL Da Yu's opinion: The flow of funds is one point, and foreign exchange fluctuations are also another point. In addition, it takes a long time for technology stock investment, valuation and returns to match. AI currently seems to be suffocating mainly for dreams.