Is the impending interest rate cut really good for the market?

Author: 0xTodd, Ebunker co-founder Source: X, @0x_Todd

I have an untested idea: before the interest rate cut, especially the closer to the interest rate cut, the more funds in the risk market are withdrawn.

For example, now, regardless of the coupon rate, the yield of medium- and long-term US bonds has dropped from the peak of 4.5-5% to the current 3.5%-4%. If the interest rate cut is officially announced, or even a series of interest rate cuts begin, the actual yield will naturally go down, which will be reflected in the increase in the price of the bonds themselves.

(Maybe) Some funds in the market think:

Now is probably the last window to increase positions in US bonds, locking in 4% of US dollars, and once locked in, it can be locked for 10 or even 30 years, the interest rate is still very attractive.

Then these funds can only desperately withdraw from the risk market during this time window (August-September), causing the darkness before dawn in the market.

The interest rate cut is a milestone event. Before the interest rate cut, there is no sense of urgency, and everyone is thinking about continuing to make a profit in the risk market. Only when the interest rate cut is approaching, the mentality of "hurrying to catch the last bus" begins.

Therefore, when the interest rate cut is approaching, not only will there be no imagined price-in increase effect, but we will feel that liquidity has been decreasing.

And when the official announcement of the interest rate cut begins, the funds that should have left have already left. And those who stay are obviously waiting for the party to start.

PS: Of course, investors in the crypto market seem to have a much different risk preference from U.S. bond investors, and the user profiles may not match, so it is an unverified idea.

Crypto Yihang Comments:

Crypto KOL Daewoo's opinion: The flow of funds is one point, and foreign exchange fluctuations will also be one point. In addition, the matching of technology stock investment, valuation and returns requires a relatively long time. AI currently seems to be suffocating mainly for dreams.