The Federal Reserve's interest rate cut is a certainty, which may ignite a new wave of market enthusiasm in cryptocurrency, presenting a good opportunity for accumulation in the second half of the year

Powell's latest speech indicates that the interest rate cut cycle is approaching, but the market is also worried about problems in the U.S. macro economy. The intertwining of rate cut trades and recession trades has increased volatility in global financial markets; Nvidia released its latest earnings report, which exceeded expectations but could not prevent market disappointment and hesitation; the crypto market is strongly tied to macro trends, suggesting a quiet wait, reducing operations, while paying attention to good opportunities for accumulating Ethereum in the second half of the year.

At the beginning of August, the U.S. was the first to release the latest non-farm payroll data for July: non-farm employment increased by only 114,000, significantly lower than the expected 175,000, and a sharp decline from the previous value of 206,000. As soon as the data was released, it immediately triggered market concerns about a U.S. economic recession, directly impacting the global asset crash in the following two days. However, amidst the panic, it also brought investors more ample expectations for rate cuts, anticipating that global liquidity would enter a new expansion cycle.

As the job market cools, CPI data fell unexpectedly like a "coordinated attack": the latest CPI for the U.S. in July increased by 2.9% (expected 3.0%), and the market immediately bet on the probability of a rate cut in September. At the subsequent FOMC meeting, Powell finally indicated that the rate cut cycle is about to begin: "I am increasingly confident that inflation will return to 2%, and now is the time to adjust policy." This undoubtedly signals to the market that a rate cut in September is imminent.

It has been four years since the last rate cut by the Federal Reserve (March 2020). However, unlike the last time, this rate cut is preventive, while the last one was an emergency rate cut due to the pandemic.

The so-called preventive rate cut refers to cutting rates before a clear economic crisis occurs to prevent potential economic risks. Historical data shows that past rate cuts do not necessarily lead to market corrections, and generally, emergency rate cuts lead to economic recessions and bear markets, while preventive rate cuts lead to bull markets. It can be said that it is not the rate cuts that bring about bear markets, but rather that economic problems have already occurred, leading to bear markets, which are unrelated to rate cuts.

From the SAM indicator, the U.S. may indeed be on the brink of recession. The SAM indicator indicates that if the current three-month moving average of the unemployment rate exceeds the lowest three-month moving average of the past 12 months by 0.5% or more, it signals that a recession may begin. According to Federal Reserve data, the current reading is 0.43%. However, the real economic world is complex, and a single economic indicator cannot reflect the true state of the economy.

Therefore, there is no need to rush to conclude whether the U.S. economy will really enter a recession. We should observe the Federal Reserve's subsequent actions. If the rate cut in September exceeds expectations, it may indicate that the U.S. economy is indeed facing some issues. From the FedWatch Tool, the market currently leans more towards a 25 basis point cut rather than a 50 basis point cut. The extent of the rate cut and the recession itself are inversely related; a recession negatively impacts asset prices but leads to larger rate cuts, which benefits asset prices, and vice versa. We need not worry too much and should wait for changes in the market.

(Source: FedWatch Tool)

In August, global stock markets experienced significant volatility, making it an unforgettable month for global investors. On August 5, the Nikkei 225 fell by 12.4%, dragging down global markets. The Nasdaq index opened down 6.36% that day but was subsequently pulled up. However, after experiencing panic selling, global markets entered a steady recovery phase, with the Dow Jones Industrial Average even continuing to set new historical highs.

At the moment of the Federal Reserve's policy shift, coupled with concerns about a U.S. economic recession, it is precisely when global investor sentiment is most fragile, and any small fluctuation could trigger panic selling. The decline in the Japanese stock market was also influenced by the Bank of Japan's interest rate hike and the continued appreciation of the yen.

The most closely watched event was Nvidia's second-quarter earnings report released after the market closed on August 28. Nvidia's second-quarter revenue was $30 billion, a year-on-year increase of 122%, exceeding analysts' expectations of $28.86 billion; second-quarter data center revenue was $26.3 billion, a year-on-year increase of 154%, exceeding analysts' expectations of $25.08 billion; the expected revenue for the third quarter is $32.5 billion, with a fluctuation of 2%, while analysts expected $31.9 billion; second-quarter gaming revenue was $2.9 billion, a year-on-year increase of 16%, exceeding analysts' expectations of $2.79 billion; the second-quarter adjusted gross margin was 75.7%, compared to 71.2% in the same period last year, exceeding analysts' expectations of 75.5%; the second-quarter adjusted earnings per share were $0.68, compared to $0.27 in the same period last year, exceeding analysts' expectations of $0.64; the second-quarter net profit was $16.599 billion, a year-on-year increase of 168%, exceeding analysts' expectations of $14.64 billion; maintaining a quarterly dividend of $0.01 per share; and approving an additional $50 billion stock repurchase plan.

However, such an exceeding expectations earnings report did not bring good feedback to the market, and Nvidia fell 6.89% after hours. Currently, the market is mainly worried about Nvidia's future growth potential, leading to market sell-offs. Nvidia's performance has consistently exceeded expectations, but the marginal effect on investor sentiment is diminishing, ultimately forcing investors to downplay the AI logic and shift to macro considerations. Currently, on the eve of a macro liquidity transformation, the conflicting policies of the U.S. and Japanese central banks cast a thick shadow over the investment environment, making it difficult to see the subsequent trends.

However, WealthBee believes that AI remains the mainstream narrative, and Nvidia may not continue the previous bull run but will oscillate amidst uncertainty, gradually clearing out previous profit-taking positions. As mentioned earlier, preventive rate cuts often do not lead to bear markets, and we may still hold expectations for the continuation of a bull market.

The performance of the crypto market in August was not friendly; the global asset crash on August 5 also affected Bitcoin, which saw its price drop below $50,000 at its lowest point, before starting to oscillate and recover. After the Federal Reserve signaled a rate cut, it rose to a high of $65,000 but is currently still hovering around $60,000.

Like the stock market, investors in the crypto market are also hesitant amidst macro uncertainties. However, prices do not reflect the true market environment. According to ChainCatcher, the number of Bitcoin addresses holding at least 10 BTC has decreased in 2024. At the beginning of this year, there were about 155,500 such addresses, which declined in the first quarter, reaching a low of about 152,600 in late March. This decline is contrary to Bitcoin's price trend during the same period, reflecting profit-taking by smart money. However, as Bitcoin's price stabilized around $60,000, the number of addresses holding more than 10 BTC reversed in August, rising to 153,500, indicating that some addresses have begun to bottom out and accumulate amidst the oscillation. The U.S. Bitcoin spot ETF is also experiencing continuous net inflows.

Currently, the crypto market has not seen a new narrative, thus Bitcoin's price trend is aligning with the macro environment. The state of the U.S. economy determines Bitcoin's short- to medium-term trend. The U.S. economic situation is not easy to predict, but the massive amount of money released by this preventive rate cut will likely drive the price of Bitcoin, a fixed-supply asset, higher. After all, if quantity cannot dilute inflation, it can only achieve a higher increase than inflation.

However, Ethereum's performance has not been as strong as Bitcoin's. As of the 29th, the U.S. Ethereum spot ETF has seen nine consecutive days of net outflows:

Currently, the ETH/BTC exchange rate has reached the 0.4 mark, setting a new low since 2021. The factors leading to Ethereum's continued weakness are multifaceted, with Grayscale's ongoing sell-off being one of the core reasons. Industry KOL and founder of 10k ventures, Zixi.eth, stated in his analysis that the second half of this year is very suitable for accumulating ETH. After Ethereum began trading on Nasdaq on July 23, it will repeat the process of Grayscale selling BTC earlier this year, which may last from half a month to a month until the market can absorb Grayscale's sell-off. Once this critical point is reached, it will be a very good opportunity to accumulate. WealthBee suggests paying attention to the BTC/ETH exchange rate in the second half of this year; once Grayscale's net outflow ends, it will be the time to accumulate.

Therefore, since the crypto market is currently tied to macro trends, we just need to sit tight and reduce operations. At the same time, pay attention to the trends of oversold assets represented by ETH, as oversold assets often have stronger rebound momentum.

The Federal Reserve's rate cut decision has ignited market enthusiasm, bringing a positive shift to the cryptocurrency sector. As inflation slows and the job market stabilizes, investor sentiment has shifted from pessimism to optimism, expecting asset prices to rebound strongly after a brief adjustment. Bitcoin has demonstrated its appeal as a safe-haven asset, even gaining institutional support amidst volatility, indicating that its value will be further confirmed and enhanced. Especially as Grayscale's sell-off of ETH comes to an end, the fluctuations in the ETH/BTC exchange rate will become a buying signal that investors cannot afford to miss. In this wave of monetary easing, the cryptocurrency market, particularly Bitcoin and Ethereum, will usher in a new growth cycle, providing valuable entry opportunities for investors.