After the wide range of fluctuations from August to early September, with the Fed's interest rate cut landing, the panic in the crypto market has eased, and the bulls have started to take the upper hand. $Bitcoin (BTC.CC)$ From the low point of $52,550 at the beginning of this month to now, the range has increased by nearly 20%, and the rebound is very strong. $Ethereum (ETH.CC)$ It has also risen sharply for three consecutive days.

Since hitting the record high of nearly $74,000 in March, bitcoin is still in a slump, appearing relatively quiet compared to the previous halving market. However, now with the big move by the Fed, a 50 basis point interest rate cut, officially transitioning to an accommodative cycle, it may bring a 'new narrative' to the crypto sphere.

How does the interest rate cut affect the trend of bitcoin?

Typically, an interest rate cut cycle is accompanied by a strong rise in bitcoin. Due to the decrease in the cost of capital, stimulating economic activity and investment, investors are more inclined to high-risk, high-return assets like cryptocurrencies. At the same time, if the interest rate cut conveys the Fed's optimistic outlook on the economy, this will encourage investors to take on more risk.

However, looking back at the two interest rate cuts cycles in 2019-2020, Bitcoin will have different performance in the short term. On August 1, 2019, the Federal Reserve announced a 25 basis point interest rate cut, lowering the target range for the federal funds rate to 2% to 2.25%. However, Bitcoin priced in the interest rate cut ahead of time and reached a phase high of $0.013 million two months before the cut, but then showed a downward trend after the cut.

By March 2020, in response to the impact of the COVID-19 pandemic on the global economy, the Federal Reserve took immediate action, cutting interest rates by 50 and 100 basis points. Bitcoin continued to fluctuate in the following two months. However, combined with the halving in May, Bitcoin started a bullish market after July and reached a new high of $65,000 in April 2021, with a cumulative range increase of 600%.

Based on historical experience, the commonality of the two interest rate cut cycles is that they brought significant volatility to Bitcoin. In addition, although the short-term trends are different, Bitcoin will still break through and rise after consolidation.

Julien Bittel, Director of Global Macro Research at financial consulting publication Global Macro Investor, believes that the current price structure of Bitcoin is starting to resemble that of 2019, both in a consolidation phase. He pointed out that this consolidation has lasted for a long time, and if the current market trend remains unchanged, we can expect to see some significant upward momentum.

Institutions adding positions, upcoming elections, is there a chance for the next bull market in Bitcoin?

Despite the strong market wait-and-see sentiment, large Wall Street funds are still firmly building positions in this volatile cryptocurrency market.

First, there are the so-called "holdings" of large currency holders. $MicroStrategy (MSTR.US)$Once again, MicroStrategy has made a bold move by purchasing 1.1 billion worth of bitcoin. According to the latest SEC filings, MicroStrategy has purchased approximately 0.0183 million bitcoins over the past month, with a total investment of around 1.11 billion USD and an average price of around 60,655 USD. Currently, MicroStrategy's bitcoin holdings have a floating profit of approximately 5.737 billion USD.

As of September 12, 2024, MicroStrategy holds a total of 244,800 bitcoins, with a total purchase cost of approximately 9.45 billion USD and an average price of around 38,585 USD. This accounts for 1% of the total bitcoin supply.

In addition, looking at the amount of bitcoins held by bitcoin ETF issuers, their holdings have generally been trending upwards since the launch of spot ETFs, and market funds have also tended to flow into these spot ETFs.

Anthony Scaramucci, founder of hedge fund Sky Bridge, predicts that after the presidential election in November, interest rate cuts and clarity in US cryptocurrency regulation will together drive bitcoin prices to new highs. He successfully predicted on Wednesday that the Fed would cut interest rates by 50 basis points and expects a cumulative cut of at least 150 basis points over the next 18 months, which he believes will be a significant bullish factor for global risk assets.

Scaramucci revealed that the next US Congress will pass a bipartisan bill supporting cryptocurrency, bitcoin, and stablecoins. Both the Democratic and Republican parties will work together to promote this legislation. He is confident in the cryptocurrency policies of the Harris administration, stating that his campaign team advisor has revealed that Harris will support measures to promote the development of the industry while maintaining necessary regulatory safeguards.

With the gradual easing of interest rates and the clarification of crypto regulations, he boldly predicts that bitcoin will surpass its historical high and reach an astonishing 0.1 million USD before the end of the year.

It is worth noting that a 50 basis point rate cut has provided short-term boost to the market, but the market's expectations for the future prospects of the US economy are gradually diverging. Some investors are optimistic about a soft landing of the economy, while others remain cautious about economic outlook. The future trend of the market may become more complex and volatile.

Zach Pandl, the director of research at Grayscale Investments, stated that if the unemployment rate continues to rise and signs of layoffs emerge, there could be a period of economic weakness where assets such as bitcoin and technology stocks may weaken in a typical cyclical manner.

However, during a loose monetary policy cycle, any pullback could be an opportunity to buy at a low. Zach Pandl believes that the economic recession will be an excellent time to accumulate bitcoin, as the market is likely to see loose monetary policy and loose fiscal policy, just like during the pandemic.

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