I have an unverified idea.

Before the interest rate cut, especially as the interest rate cut approaches, funds in the risk market are being withdrawn more severely.

For example, regardless of the nominal interest rate, the medium and long-term US Treasury bond yields have dropped from the peak of 4.5-5% to the current 3.5-4%.

If the interest rate cut is officially announced, and even consecutive interest rate cuts begin, the actual yield will naturally decrease, reflected in the rise in bond prices.

The (possible) idea for some funds in the market is:

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

So, these funds can only be withdrawn from the risk market desperately during this time window (August-September), causing darkness before dawn in the market.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 before making a decision. As the interest rate cut approaches, people start to have the mindset of "trying to catch the last bus."

Therefore, as the interest rate cut approaches, instead of the expected price increase effect from pricing in, we will feel that liquidity continues to decrease.

By the time the interest rate cut is officially announced and begins, the funds that should have left have already left.

And those that remain are obviously the ones waiting for the party to start.

PS: Of course, the risk preferences of investors in the cryptocurrency market seem to be very different from those of US bond investors 😂, and the user profiles may not necessarily match, so this is an unverified idea.

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