"Once the Fed makes a move, we know whether it will work or not." This market saying has been confirmed again in the recent cryptocurrency market. After the Fed's latest interest rate decision was announced, the Bitcoin ETF suffered the largest outflow of funds since March, up to $621 million, which triggered widespread market concerns about the future trend of cryptocurrencies.
The core conflict of this incident is that the Fed's hawkish stance runs counter to the crypto market's expectations for loose monetary policy. Although Fed Chairman Powell did not explicitly state in his speech that he would continue to raise interest rates, the signal of maintaining high interest rates is still strong. This news is like a basin of cold water poured on the crypto market, which was already in a period of shock adjustment. Investors' risk aversion has increased, and they have sold risky assets such as Bitcoin and turned to seek more stable investment targets.
Faced with the uncertainty brought about by the Fed's policies, investors inevitably have questions in their minds: Will the cryptocurrency market repeat the mistake of "falling and falling" in 2022? Does the large-scale outflow of funds from Bitcoin ETF indicate that a bear market is coming? How should the counter-trend inflow of other crypto assets such as Ethereum be interpreted?
Is the crypto market in the "preparation stage" for the next bull market?
Most Wall Street banks recently postponed their expectations for the first rate cut to September or later. Although the interest rate-sensitive Nasdaq continues to hit record highs, Bitcoin has fallen from $71,000 to $67,000.
The core concerns of the future market include:
1. The expectation gap between macroeconomic trends and the actual market reaction.
2. When will the Fed start to cut interest rates, and the expectation gap of 300,000 non-farm unemployment to the advance of the interest rate cut time.
3. The expectation gap between the shift in the sentiment of Bitcoin ETF capital inflows and the fundamentals of the virtual asset market.
4. The recovery of old Defi projects after the approval of Ethereum ETF, and the market's overly pessimistic expectation gap on Ethereum ETF.
We need to rationally analyze the impact of the Fed's policies and make judgments based on the development laws of the crypto market itself. The Fed's policy of maintaining high interest rates is indeed bearish for the cryptocurrency market. In a low-interest environment, liquidity is abundant, and investors are more inclined to invest in risky assets to pursue higher returns. Cryptocurrency, as a high-risk, high-yield asset, will naturally be sought after. As interest rates rise, capital costs increase, and investors' risk appetite decreases, the cryptocurrency market will inevitably be impacted.
The large-scale outflow of funds from the Bitcoin ETF this time is also related to investors' demand for short-term profit-taking. Data shows that the price of Bitcoin has risen by more than 80% since the beginning of this year. Some investors choose to take profits at this time, which is also a normal adjustment behavior of the market.
However, this does not mean that the cryptocurrency market has entered a "cold winter". On the one hand, in the long run, as an emerging digital asset, the underlying technology and application scenarios of cryptocurrency are still developing and improving, and there is still huge development potential in the future. This can be seen from the recent rise in the price of crypto miners these days.On the other hand, the counter-trend inflow of other crypto assets such as Ethereum also shows that the market's investment enthusiasm for high-quality projects is still high. More importantly, we need to realize that the Federal Reserve's monetary policy is not the only factor that determines the trend of the cryptocurrency market. The development laws, technological innovations, regulatory policies and other factors of the crypto market itself will have an important impact on the market trend.
In the future, the cryptocurrency market is still full of opportunities and challenges.
This is mainly reflected in two aspects:(1) With the continuous development and application of blockchain technology, the application scenarios of cryptocurrency will be more abundant, injecting new impetus into market development.
(2) The continuous improvement of global regulatory policies will also create a more standardized and transparent development environment for the cryptocurrency market.
As Buffett said: "Only when the tide recedes, you will know who is swimming naked." The market volatility brought about by the Fed's policy is both a test and a reshuffle for the crypto market. Those projects that are truly valuable will stand the test and eventually stand out.
For investors, when facing market fluctuations, they need to remain rational and not blindly follow the trend. On the basis of fully understanding the risks, choosing high-quality projects for long-term investment is the key to obtaining long-term stable returns.
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