🔍 Context
• The market firmly believes that the Federal Reserve (Fed) will cut interest rates at its next meeting, with an estimated ~96% probability of a 0.25 percentage point cut.
Bitcoin has risen approximately 5% this week, approaching its recent highs, indicating positive sentiment among cryptocurrency investors. Other risk assets like Ethereum, XRP, and Solana have also gained ground.
• However, it should be noted that much of this expectation is already "priced in." What could generate volatility is not so much the rate cut itself, but rather how the Fed communicates its future outlook, especially what Jerome Powell says in the post-decision conference.
📈 Possible implications for cryptocurrencies and stock markets
This is what the analysis suggests could happen, influencing both cryptocurrencies and stocks:
• Consolidation / little reaction to the announced cut
Given that many traders already anticipate the price drop, it is likely that, when it occurs, the price movement will be moderate. It is the classic example of "buy the rumor, sell the news": the markets have already priced in the price drop, so there might not be any major bullish surprises just because of the drop itself.
• High sensitivity to communication ("forward guidance")
Powell's words will be key. If he suggests that the cut is just the beginning of a more flexible monetary policy, or that additional cuts are on the horizon, this could further boost cryptocurrencies. But if he emphasizes the inflationary risk, remains cautious, or leaves the possibility of further adjustment open, a correction could be triggered.
Main latent risk factors
• Inflation is not slowing down at the expected pace.
• Solid economic data justifying high rates (employment, consumption, production).
• Geopolitical or financial tensions that could increase the preference for safe-haven assets, diverting capital away from cryptocurrencies.
• Regulatory changes that could affect the legal or tax security of crypto assets. Relationship with other assets: When interest rates decrease, liquidity generally increases: investors can abandon less productive assets (bonds, low-interest cash) and seek higher-risk returns, such as growth stocks and cryptocurrencies. However, this effect only materializes if the rate cut is accompanied by signs of greater monetary support.
💡Strategies that could make sense
For a reader/investor informed about cryptocurrencies or stocks, here are some suggested tactics:
• Maintain your current positions, but be attentive to stop losses: if you have already invested in Bitcoin or other crypto assets, it may be advisable to have stops set up to protect your gains if Powell's comments are less encouraging than expected.
• Have liquidity ready: Have cash or stablecoins available to enter if there is a pullback caused by an unfavorable surprise.
• Diversification between cryptocurrencies and other risky assets: don't put everything in cryptocurrencies; growth stocks, tech stocks, etc., could react similarly and some may have lower operational/regulatory risk.
• Pay attention to macroeconomic indicators: inflation, employment, industrial production: if they unexpectedly strengthen, they can neutralize the implicit stimulus of a cut.
⚠️ Possible alternative scenarios
Although almost everything seems "taken for granted," there are always scenarios that could alter the expected course:
Scenario
Powell suggests that there will only be one cut and then a hard pause.
Macroeconomic data shows severe weakness (for example, unemployment is rising dramatically and inflation is falling rapidly).
External factors (political, regulatory, global crisis)
What could happen?
Let's let the markets deflate and the gains reverse.
The Fed leans toward several cuts.
Probable reaction of the cryptocurrency market
Moderate sales in the short term; concerns about "higher for longer" rates.
Strong rebound, high-risk assets gain ground
Volatile or defensive cryptocurrency.
🧮 Conclusion
In summary, it seems that the cryptocurrency market is in a wait-and-see mode: there are already many expectations built in. This implies that:
• The important thing is not whether there will be a cut, but how the Fed communicates it: if it hints at more measures, if it changes its language, if it points out the risks.
• Unless there are surprises, it is likely that we will see some calm or consolidation in the prices of Bitcoin and other cryptocurrencies this week.
• But there is room for a significant movement if any of the key components (macroeconomic data, messaging).
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