An 87% probability of a rate cut is right there, but the market reaction has been bizarre—Bitcoin plunged straight down to $84,000 in early December, and Ethereum evaporated 10% in a single day. Even more dramatic, institutions took advantage of the chaos to dump over $20 billion in crypto assets. This move clearly doesn't fit the usual "rate cut bullish" script.

First, let's talk about this "precautionary rate cut." Logically, a rate cut should give the market a shot in the arm, but Goldman Sachs has already made it clear: a 25 basis point rate cut in December is a done deal, yet the market started tanking early. Why? Because Powell's previous hawkish remarks slashed rate cut expectations from 80% to 40%—inflation data is sticking around like chewing gum, plus the government shutdown has led to missing economic data, so investors can't really figure out the Fed’s hand.

That recent rebound? Don't get excited too soon. That was just a technical correction after $985 million in short positions were liquidated. On the night of November 27, 100,000 accounts were liquidated, 90% of which were long. You really think the bull market is back?

What to do specifically? Three words: Don’t act rashly.

First, position allocation is key. Try the "532 rule": put 50% of your funds in mainstream coins (Bitcoin, Ethereum) as your base—these two are highly resistant to drops; 30% in small positions to test those potential altcoins, betting on rebound potential; keep the remaining 20% in cash, always ready to buy the dip or exit quickly. Don’t go all in, and absolutely avoid high leverage.

Second, keep a close eye on the Fed’s "code words." Powell is giving a speech at 2:00 a.m. on December 10—this is a critical moment. It’s recommended to use the "FedWatch" tool to track rate cut probability in real time; if he mentions words like "pause rate cuts," reduce your position immediately, no hesitation.

Third, set clear take-profit and stop-loss lines. If Bitcoin falls below $80,000, that’s the life-or-death line—once it’s breached, get out first. Don’t believe any nonsense about "making money lying down"—those who chased altcoins at the top in 2024 are still stuck up there. Beginners should stick to mainstream coins, and even experienced traders need proper safety stops when playing with altcoins.

There’s another easily overlooked risk—regulation. Some regions have already brought stablecoins under regulatory oversight recently, and things like money laundering or illegal currency exchange can actually land you in jail now. When market sentiment swings wildly, regulatory actions tend to get even harsher.

Bottom line, rate cuts are a double-edged sword. On the surface, it looks like a liquidity boost, but with institutions exiting early and the market dropping first, it shows the big money has already sensed something’s off. If retail investors want to survive, they have to go against the grain—stay calm when others panic, stay cautious when others go crazy.

In the next few weeks, the market will probably keep tugging back and forth. The volatility window around the actual rate cut is the real test.