The US CPI hit its lowest level in three years. Bitcoin will not rise but fall. Where will cryptocurrencies go in anticipation of the Federal Reserve cutting interest rates? Low fluctuation or reversal against the wind?

Amid recent financial market fluctuations, the Federal Reserve's monetary policy adjustments have undoubtedly become the focus of global investors' attention. In particular, discussions on whether the Federal Reserve will cut interest rates drastically this year, especially in September, have sparked widespread speculation and discussion in the market. For the cryptocurrency market, this expectation has brought about a complicated situation where hope and risk coexist.

The cryptocurrency market has shown mixed reactions under the influence of expectations that the Federal Reserve will cut interest rates. On the one hand, expectations of interest rate cuts have boosted market confidence and driven the prices of cryptocurrencies such as Bitcoin to rise; on the other hand, market expectations about the extent of interest rate cuts have also led to price fluctuations.

Last week, the US Department of Labor released the consumer price index (CPI), which has received much attention from the market. The report shows that the US CPI increased by 0.2% per month in July, higher than the 0.1% monthly decrease in June, but in line with market expectations. The annual CPI growth rate fell to 2.9% in July, lower than the 3% increase expected in June. This was the fourth month of continuous cooling, the lowest since March 2021, and returned to the “beginning of 2” for the first time.

The cryptocurrency market experienced sharp fluctuations after the CPI data was released. Bitcoin and Ethereum rose briefly after the data was released, but then quickly fell back. Bitcoin once surged to $61,839, but as selling pressure surged, it quickly fell below $0.06 million and fell 4.55% within 24 hours. The trend of Ethereum is similar. After hitting a high of $2,784, it fell rapidly and fell 2.55% within 24 hours.

On the one hand, the CPI data shows a decline in the inflation rate. Although the decline in the inflation rate is generally seen as a good sign of economic stability, in the cryptocurrency market, this data has sparked investors' speculation that the Federal Reserve may cut interest rates.

The Federal Reserve's interest rate cut policy often means an increase in the money supply and a decrease in interest rates, which is usually good news for the cryptocurrency market. However, in the current situation where market sentiment is extremely pessimistic, investors prefer to view interest rate cuts as a sign of recession rather than an opportunity for market recovery. As a result, although the CPI data itself may potentially benefit the cryptocurrency market, market sentiment dominates the downward trend in prices.

Meanwhile, Trump and Musk participated in a Twitter Space conference that was supposed to focus on cryptocurrencies and unexpectedly remained silent on Bitcoin. This incident further confused market signals and heightened investors' unease.

On the other hand, the US government transferred 0.01 million seized bitcoins linked to the Silk Road dark web market to CoinBase Prime, a move that immediately caused an uproar in the cryptocurrency market.

This batch of bitcoins is worth approximately $0.591 billion, and the transfer records come from the “US Government: Silk Road DOJ” wallet. This mark has undoubtedly increased the sensitivity and uncertainty of the market. Although similar large-scale government asset transfers in the past did not directly trigger a sharp decline in the market, the timing of this transfer coincided with weak market sentiment, further exacerbating investors' fears.

The pessimistic market sentiment stems not only from concerns about a potential sell-off, but also because the move may suggest a subtle change in the government's attitude towards Bitcoin. Although the US government has stated its regulatory stance on cryptocurrencies such as Bitcoin many times before, such large-scale asset transfers are still interpreted by the market as a potential signal of sell-off. Investors are concerned that this move could trigger a ripple effect, leading to more seized cryptocurrencies being introduced to the market, thereby putting downward pressure on prices.

Meanwhile, over $1 billion of Tether stablecoin (USDT) was withdrawn from cryptocurrency exchanges, a figure that hit a new high since May. USDT is a stablecoin with a constant exchange rate with the US dollar, and large-scale withdrawals are generally seen as a sign of investors' risk aversion. Investors may choose to transfer funds from exchanges to safer storage methods such as cold wallets or other traditional financial institutions due to concerns about market uncertainty. This flow of funds not only increased the liquidity tension in the market, but also further lowered the price of cryptocurrencies.

However, from a broader perspective, the cryptocurrency market is still supported by a favorable political environment, continued growth in institutional investment interest, and the positive impact of Bitcoin ETF approval. Furthermore, the increase in stablecoin trading volume and the gradual clarification of the regulatory environment have also boosted investors' confidence to a certain extent, despite recent sharp market fluctuations.

The company disclosed its investment in seven Bitcoin ETFs in its 13F filing, particularly its large holdings in BlackRock's iShares Bitcoin Trust (IBIT), which underscores the importance institutional funding attaches to the Bitcoin market. Recently, capital inflows to spot Bitcoin ETFs have increased significantly, particularly to BlackRock IBIT and Fidelity FBTC, further boosting market attention.

Marathon Digital (MARA) has long been involved in the Bitcoin mining business. This week, it successfully raised $0.3 billion in convertible bonds and used this money to buy more than 4,000 bitcoins at a price of approximately $0.059 million each. Medical device manufacturer Semler Scientific (SMLR) announced its Bitcoin funding plan a few months ago, and recently received approval from the US SEC to continue financing over $0.15 billion, and the proceeds will be used to buy more bitcoins.

Should the price fall below the $57,700 spot support level, further downside targets would be $54,640 and $51,350. Conversely, an effective break through the $59,750 resistance level may indicate that the price will begin a new round of upward trend, followed by key resistance levels of $61,870 and $64,640.

For investors, selling Bitcoin below $57,700 may be a prudent strategic choice, and once the price breaks above $59,750, it could be a positive buying signal, signaling an imminent bullish reversal in the market.

However, in this situation, you should be especially careful and do a good risk assessment.

Since Bitcoin broke through a new high of 0.069 million dollars three years ago, it has fluctuated widely in the range of 50,000 to 70,000 US dollars for more than a month. After Bitcoin is halved, the only predictable story is that the Federal Reserve will cut interest rates.

However, this incident has almost come to an end. According to the CME Board's observation data, the probability that the Fed will cut interest rates on September 24 has increased dramatically, but it is still unknown whether it will be cut by 25 basis points or 50 basis points. Currently, the probability of both is about 55.

Bybit report author Nathan Thompson said that Bitcoin is currently in the second phase of the bull market. According to historical trends, at this stage, the spot price of Bitcoin has recovered from the low point of the cycle, close to the historical high set in the previous cycle. The future market is expected to break through the previous historical high and enter a higher price range.

Well-known cryptocurrency analyst Rekt Capital also believes that if described as a progress bar, Bitcoin's current bull market has finished 42.5%, which is in line with the past two halving cycles.

1. Interest rate cuts will not directly open up the stock market and the long market for major assets; the related impact is often already Price In;

2. The impact of interest rate cuts on the future market depends on the overall economic situation at the time, whether interest rates were cut voluntarily to promote economic development, or whether the Black Swan incident forced them to cut interest rates. From the perspective of US stocks, it is a struggle for economic resilience and easy pricing of liquidity.

3. Gold benefits from falling interest rates (while the dollar falls) and rises in most cases, and the hard landing model usually performs better.

As a result, it is difficult for interest rate cuts to become a fundamental driving force for the rise in the Bitcoin and crypto markets. Since 2024, we have experienced events such as Bitcoin spot ETFs and halving, and the market needs the next big story or fundamental change.

When Bitcoin recently hit an all-time high above $73,000, there was no typical increase in the share of Ethereum and other altcoins in the market like in the past bull cycle. Furthermore, Bitcoin itself has not continued to hit new highs; it has been fluctuating within a relatively narrow range for the past four months.

The current bull market has continued for more than 600 days. Since the current trough to peak ratio is 3.5 times lower than 20 times in the previous cycle, Bitcoin's bull run period is likely to continue for more than 300 days. When Bitcoin recently plummeted, it fell below the key post-halving growth trajectory, but if it can return to this trend line by the end of 2024, it is expected to challenge the high of 0.1 million dollars.

Judging from the price alone, it is still a bull market. However, judging from the trend trend, it is now a bear market. The starting point of this bear market was when it fell below the bullish line on 6.18. Although prices went up and down during this period, it was ultimately trending down in the general direction, so the overall trend is bearish. In the future, after reaching a new low, then attacking and then starting a bull market, that is the real bull market after this round of halving. In the future, we should continue to pay attention to favorable news in order to make a judgment.

In summary, the cryptocurrency market, which is expected to cut interest rates by the Federal Reserve, is full of hope and risk. In the short term, the cryptocurrency market has shown a downward trend due to various factors, and market trends have also raised concerns. However, under the influence of multiple adverse factors, favorable factors continue. The current sluggish market sentiment does not necessarily mean the end of the bull market, but the opening of a big bull market in the future still needs to be stimulated by major favorable factors, so everyone should continue to wait and be careful.