The Federal Reserve announced at 2 a.m. Beijing time on the 19th that it would cut the benchmark interest rate by 0.5%, marking the first rate cut since 2020. The cryptocurrency market subsequently saw an uptrend, with Bitcoin briefly breaking through $61,320 before quickly dropping. However, after stabilizing around $60,000, Bitcoin began a rapid surge after 6 a.m. this morning, reaching a high of $62,555. At the time of writing, it was priced at $62,687, with a nearly 4.12% increase in the past 24 hours, marking the highest price since the end of August.

Is the rate cut really beneficial for cryptocurrencies?

Generally, a rate cut will be favorable for safe-haven assets, and over time, as rate cuts continue, a large amount of market liquidity will flow into gold and cryptocurrencies. However, looking back at history, after the Federal Reserve initiated its first rate cut in years in September 2019, Bitcoin did not rise in the short term. Instead, it fell by 13.54% that month, from $10,000 to around $8,300, because the rate cut at that time was aimed at rescuing the economy from recession.

The chart below shows the trend of the U.S. S&P 500 index and the U.S. benchmark interest rate since 1980. We can see that in 2020, the new crown epidemic, the financial tsunami in 2008, and the dot-com bubble in 2000, the index fell in sync with the interest rate.

The reason for such performance is that the Federal Reserve initiated rate cuts at that time due to more serious economic recession issues, forcing the Federal Reserve to ease, but this is not a long-term favorable news for the investment market.

The reason for the rate cut this time?

Next, let's follow the expert to understand the reasons for the significant rate cut by the Federal Reserve. Half an hour after announcing the latest interest rate decision, Federal Reserve Chairman Powell held a press conference on monetary policy. Powell emphasized in the press conference: "This is a precautionary measure aimed at maintaining a stable economy and labor market, and does not mean that an economic recession is imminent or that the labor market may collapse." This has reduced market concerns about economic recession and increased the possibility of a soft landing.

According to the latest dot plot from the Federal Reserve, in the last two meetings in November and December this year, the rate will be cut by a total of 2 points. It may be a 1-point cut in each of these two meetings, or there may be one meeting with no cut and one meeting with a direct 2-point cut. (This sentence is a bit redundant, haha)

At the same time, from the chart, we can see that there will be 4 rate cuts in 2025 and 2 in 2026, indicating that the endpoint of the rate cut may fall in the range of 2.75%-3.0%. Although Powell pointed out that the future level of interest rates is unlikely to return to the ultra-low levels before the epidemic.

Bitcoin Daily Chart

Looking at the Bitcoin daily chart, there are signs of a breakthrough near the upper rail. If the price effectively breaks through and stabilizes above the upper rail, then there will be further room for Bitcoin's price to rise. If it encounters resistance at the upper rail and cannot break through, it may continue to seek opportunities for a downward correction. The DIF line and DEA line in the MACD indicator form a golden cross above the zero axis, indicating a strong bullish sentiment in the current market. All three KDJ lines are above 80 in the overbought zone, and if the J line shows signs of turning downward, the price may experience a downward correction. The RSI value is 73, also in the overbought zone, confirming the strong market sentiment, but caution is needed for the risk of a short-term resistance and correction.

Bitcoin 4-hour Chart

Looking at the 4-hour chart of Bitcoin, the price is near the upper rail of the Bollinger Bands, and the price has briefly broken through the upper rail before, indicating that Bitcoin is in an uptrend. The DIF and DEA in the MACD are running above the zero axis, showing a strong bullish trend, and the red histogram in the MACD is gradually increasing, further indicating a strong bullish trend. All three KDJ lines are above 80 in the overbought zone, indicating short-term pressure for a correction. If a dead cross is formed at a high level, the depth of the correction will be lower. The RSI value of 78 also indicates that it is currently in the overbought zone, and caution is needed for the risk of a resistance and correction.

In summary, the expert provides the following suggestions for reference:

For Bitcoin, consider light positions at $62,000, add positions at $61,600, with a target of $63,300-$64,000, and a defensive position at $61,400.

Instead of giving you a 100% accurate recommendation, it's better to give you the correct mindset and trend, after all, teaching someone to fish is better than giving them a fish. The focus is on the mindset, grasping the trend, and planning the layout and position of the market. What I can do is to use my practical experience to help you make investment decisions and manage your operations in the right direction.

Drafting time: (2024-09-19, 19:40)

（Author - Expert on Cryptocurrency）Special Note: Online publications have a delay, and the above suggestions are for reference only. The author is committed to research and analysis in the investment fields of Bitcoin, Ethereum, altcoins, foreign exchange, stocks, and has been involved in the financial market for many years, with rich experience in actual trading. Investment involves risks, so caution is needed when entering the market. For more real-time market analysis, please follow the official account of the cryptocurrency expert for discussion and exchange.

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