I have actually explained this issue many times. Not only are cryptocurrencies declining, but U.S. stocks are also falling. A rate cut does not necessarily mean good news; focusing solely on rate cuts without considering the economy is misleading. I often use a metaphor to explain the logic of rate cuts.

If you are worried that wolves will take your sheep and reinforce the sheep pen, that is a defensive measure. At this point, the wolves have not yet arrived, and there are still many opportunities, just like the Federal Reserve starting to cut rates before the economy enters a recession, for example, at the end of 2024. At this time, the market's expectations for the economy are positive, and rate cuts are beneficial for economic stability.

However, if the sheep pen has already been breached by wolves, and wolves are stealing sheep every day, then repairing the fence is just "mending the pen after the sheep are lost." For the Federal Reserve, if the economy has already entered a recession, further rate cuts may only provide relief, but the recession has still occurred, leading to increased panic in the risk market.

Currently, we are in between the two scenarios. Although the wolves have not yet arrived, we can already see the wolf pack, and the sheep pen has leaks everywhere. Yes, I know the question will be, if we can see the wolves, why not fix it immediately? Because there is also inflation.

This inflation is akin to sheep disease. If not handled properly, all the sheep will die. However, dealing with sheep disease requires giving the sheep open space; sealing off the sheep pen will cause the disease to explode within the pen, leading to a worse outcome.

The current situation is that the Federal Reserve needs to address the sheep disease, while Trump wants to repair the sheep pen without regard for the disease. Both approaches are not wrong, but in the end, it is the sheep that will suffer!

This article is sponsored by #Bitget ｜ @Bitget_zh

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