Interest Rate Cuts, Greed, and U.S. Debt: Is Bitcoin on the Brink of a New Round of Turmoil?

In the crypto market, each cycle has different narratives and hype themes. Nowadays, expectations of interest rate cuts, trends in US Treasury yields, macroeconomics, and institutional leverage strategies are intertwined, constructing a potential “high fluctuation critical point” for Bitcoin (BTC) and the entire crypto market. In the short term, the market may face a key fluctuation; in the long term, this game driven by policy and capital may change the valuation logic and fluctuation cycles of Bitcoin.

Interest Rate Cuts and Market Greed: Powell’s “Dovish Hint”

On August 22, Federal Reserve Chairman Powell released subtle dovish signals in his speech, which the market quickly interpreted as a high probability event for a rate cut in September.

Labor Market: Supply and demand appear balanced, but downside risks are rising.

Inflation issue: Tariffs drive up prices, and the Federal Reserve returns to a balanced model of “2% hard target,” no longer tolerating the long-term existence of high inflation.

The market has basically digested the expectations of interest rate cuts, but this does not mean that risks have disappeared. If the core PCE remains at 2.5%–3% in the long term, and the Federal Reserve still cuts interest rates due to economic pressure, the market will question the credibility of its 2% inflation target.

Once this confidence wavers, funds may accelerate towards scarce assets like gold and Bitcoin, pushing the crypto market into a higher fluctuation range.

U.S. Debt and Institutional Leverage: Strategy’s “Empty-Handed Wolf”

The correlation between Bitcoin and US Treasury bonds is deepening, especially at the level of institutional capital operations.

The gameplay of Strategy (MSTR) is a classic case:

Low Intrerest Rate financing (issuing bonds or stocks) → buy BTC.

BTC rises → MSTR stock price rises → Further issuance of stocks for financing → Continue buying BTC.

Leverage Cycle: If the BTC increase > financing cost, the arbitrage space continues to exist.

As of Q2 2025, MSTR has held 632,457 BTC, with an average cost of $73,539, a total value of approximately $6.98 billion, and a market capitalization of up to $9.73 billion, with a NAV premium rate of 40%.

This model thrives in a low interest rate environment, but if long-term US Treasury yields rise due to increasing inflation expectations, the leverage space for institutions will be squeezed, potentially triggering a “crypto version of the leverage bubble burst.”

Fourth Quarter: Bitcoin may face a 15%-30% monthly Fluctuation

This year, the volatility of BTC has significantly compressed, with no monthly fluctuation exceeding 15% so far. However, historical experience shows that the end of the year is often a period of high volatility.

Bullish perspective: Interest rate cuts + liquidity release → Capital flows into risk assets → Probability of BTC breaking new highs increases.

Bearish Perspective: Interest Rate Curve Distortion + Institutional Leverage Too High → Once the market reverses, the decline may be more severe.

For traders, Q4 may be the last significant swing opportunity this year, whether going long or short, fluctuation itself is the source of profit.

Long-term risks and opportunities coexist

If the Federal Reserve’s 2% inflation target loses market confidence, it will trigger a global asset repricing:

Bonds: Long-term interest rates rise, compressing leverage space.

Stocks: Valuation model reset, capital flows towards defensive assets.

Bitcoin and gold: As scarce assets, they could become the biggest beneficiaries, but the fluctuation cycle will be extended.

In addition, with the popularization of spot Bitcoin ETFs, more institutions may replicate MSTR’s leveraged strategy, which could drive up BTC prices while also laying the groundwork for a future “de-leveraging moment.”

Conclusion

Expectations of interest rate cuts, greedy sentiment, U.S. Treasury interest rates, and institutional leverage are forming the four major variables for the next round of significant fluctuation in Bitcoin. In the short term, Q4 may see a monthly fluctuation of 15%–30%; in the long term, the interaction between policy and capital will determine whether Bitcoin reaches new highs or undergoes a deep correction due to leverage liquidation. For investors, understanding the logic of fluctuation is more important than simply waiting for prices to rise.