#Fed Rate Cut Forecast

Core Viewpoint: Rate cuts are highly priced in; once implemented, a "sell the news" pullback may occur. However, medium- to long-term liquidity easing expectations will support risk assets.

1. Market Expectations Analysis
The CME FedWatch tool shows the probability of a 25BP rate cut in December exceeds 84%, with the market having priced this in in advance. Recent CPI and employment data have been moderate, giving the Fed room to maneuver. However, note that the dot plot's guidance on the 2024 path is more important than the rate cut itself—a hawkish stance could trigger short-term profit-taking.

2. Impact Logic on the Crypto Market

· Short-term (within 24H after the decision): If the rate cut occurs as expected, BTC/ETH may spike and then pull back. Liquidity-sensitive assets (such as MEMEs and high-beta altcoins) will experience increased volatility.
· Medium-term (2024Q1): Expectations of lower real interest rates will be strengthened. Combined with progress on spot ETF approvals, this may guide traditional capital into crypto through compliant channels, and the focus of core assets like ETH/BTC is expected to shift upward.
· Related Market Signals: Watch whether the US Dollar Index (DXY) falls below 102 and the steepness of the US Treasury yield curve—these will amplify crypto’s macro attributes.

3. Recent Trading Strategy Reference

· Holders: Before the decision, consider partially taking profits on aggressive positions while retaining core holdings (such as ETH/BTC spot).
· Hedging: Consider going long on volatility (e.g., buying options) to cope with instant volatility around the decision.
· Sector Rotation Focus: If market sentiment remains positive after the rate cut, focus on sectors with strong narratives and clear fundamentals, such as L2 and RWA.

Risk Warning: If rates are unexpectedly maintained, the market may interpret it as a stronger-than-expected determination to fight inflation. Risk assets could drop more than 5%, so it is advised to set stop-losses in advance.