Is the market lying? Interest rate cuts should lead to an increase, so why are cryptocurrency prices falling?

Break down the 3 core logics and avoid the "hot potato" trap.

The implementation of policies reveals the true nature of the market. The Federal Reserve has lowered interest rates by 25 basis points as expected, bringing the interest rate range down to 3.75%-4.00%. It also announced the termination of balance sheet reduction starting from December 1. On the surface, this seems like a "watering" operation to release liquidity, yet the market has reacted with a sharp decline. Behind this unusual trend lie three key logics; understanding them is crucial to avoid becoming a "bag holder."

1. Why did interest rate cuts become "reverse bearish"?

1. Expectations were pulled forward, and good news turned into bad news.

Even before the announcement of the resolution, "a 25 basis point rate cut" had become a consensus in the market, and risk assets had already completed a round of expectation-driven increases. When the policy was officially implemented, without new positive stimuli, previously realized profits were cashed out, showcasing the classic market scenario of "buying the expectation, selling the fact." Just like how stock prices may fall after good earnings are announced, the rate cut shifted from "expected dividends" to "established facts," naturally losing its upward momentum.

2. Rare divergences trigger concerns, increasing uncertainty exacerbates panic

The recent interest rate meeting showed a dual divergence not seen in many years: one committee member advocated for a 50 basis point rate cut, while another member firmly opposed the rate cut. This division essentially reflects the Federal Reserve's contradictory judgment on the economic outlook — there are concerns about weak employment necessitating further easing, yet there is caution against inflation rebounding, making them reluctant to ease up. This uncertainty is scarier than clear bad news, directly triggering pessimistic associations regarding economic risks, and the risk-averse sentiment is rapidly rising.

3. Inflation remains uncontrolled, locking in space, and easing expectations have fallen through.

The conference statement clearly pointed out that "inflation is still above the long-term target," and Powell also bluntly stated that he would not prematurely conclude that inflation is under control. This means that the current interest rate cuts are merely "preventive easing" and not the beginning of a new round of significant rate cuts. The future policy space is limited, which completely shatters the market's illusion of continuous liquidity, becoming the key straw that breaks the market.

2. Direct impact on the cryptocurrency market: increased volatility, significant differentiation.

Historically, loose monetary cycles often provide liquidity support for the cryptocurrency market, but this time economic uncertainty has overshadowed the liquidity benefits, highlighting the market's differentiation.

- BTC and mainstream coins: Although supported by the liquidity expectations of "ending tapering" in the short term, economic concerns will suppress the upside potential, likely leading to a volatile pattern of "pressure above and support below," with significant increases in volatility.
- Altcoins: As the most sensitive variety to liquidity, under the dominance of risk-averse sentiment, altcoins lacking fundamental support have become the preferred targets for selling, with short-term risks far outweighing opportunities.

3. Three key points for retail investors to avoid pitfalls: Stay away from "taking over" risks.

1. Refuse to chase highs, beware of "fall continuation"

A pullback after good news is definitely not a good opportunity to buy the dip; entering the market at this time can easily lead to becoming a "bag holder." One should remain on the sidelines and wait for market sentiment to stabilize before making a move.

2. Leave enough ammunition, waiting for panic opportunities

It is recommended to maintain sufficient cash or stablecoin positions and patiently wait for the market to experience an "excessive fall" due to overly panicked emotions. At that time, gradually allocate core assets like BTC, which will have a much higher winning rate than blindly entering the market now.

3. Keep a close eye on signals and adjust strategies according to data.

Powell has made it clear that a rate cut in December is "far from a done deal"; we need to closely monitor inflation, employment data, and statements from the Federal Reserve. Once the policy direction changes, adjust the position strategy immediately to avoid being passively trapped.