The number of rate cuts by the Fed has sparked controversy in the market, creating new investment opportunities in the crypto market.

The U.S. Consumer Price Index in June ( CPI ) diverged from non-farm employment data, leading the market to be unable to reach a consensus on the number of rate cuts by the Fed, and only able to adopt a wait-and-see attitude. Leading companies in the artificial intelligence sector have once become the highest-valued companies globally, showcasing the rise of the AI era. However, there is significant fragmentation in the U.S. stock market, with high price-to-earnings ratios and signs of a bubble already emerging.

The crypto market experienced an unexpected drop this month, with the selling behavior of long-term holders and miners likely being the direct cause. However, this also provides new entry opportunities for subsequent investors.

The Federal Open Market Committee ( FOMC ) decided in June to maintain the federal funds rate between 5.25% and 5.50%, in line with market expectations. The overall tone of this meeting leaned dovish, differing from the previous hawkish stance. The Fed chair noted that current inflation has made "moderate progress" towards the 2% target. May CPI data shows that the inflation rate in the U.S. has indeed decreased, with core CPI rising 3.4% year-on-year, the lowest in over three years.

However, despite the positive inflation data, the non-farm employment data has cast a shadow over the prospect of interest rate cuts. The non-farm payrolls in May significantly exceeded expectations, reaching 272,000. The divergence between inflation and employment data has made it difficult for the market to form a consensus on the timing and frequency of interest rate cuts. Currently, the probability of the first rate cut in September is only 56.3%.

Fed officials have differing views on the interest rate trends for this year. Eleven committee members believe that the rate will remain above 5%, which corresponds to a maximum of one rate cut; meanwhile, eight members think it could drop to between 4.75% and 5%, which would mean a potential two rate cuts. Therefore, the specific timing and extent of the rate cuts still require further observation.

From a trading perspective, the market seems to have started betting on a rate cut by the Fed. U.S. Treasury yields have been on a downward trend in recent months, while gold prices have been consolidating at high levels, indicating that the risk appetite for funds is gradually increasing, and the attractiveness of safe-haven assets for capital is decreasing.

Currently, US inflation appears to be moving in the right direction. The latest Manufacturing Purchasing Managers' Index (PMI) is 51.7, above expectations. The GDP forecasting model from the Atlanta Fed indicates that the GDP growth rate is expected to be 3.0% in the second quarter of 2024. Therefore, investors do not need to overly worry about the US economy, just patiently wait for inflation to decline and the Fed to cut interest rates.

This month, despite a relatively good macroeconomic environment, the crypto market has seen a continuous decline. Bitcoin fell below $58,500 at its lowest, while Ethereum dipped to around $3,240. Data shows that in June, the U.S. Bitcoin spot ETF still had a net inflow of 9,281 BTC, but the market trend is contrary to the behavior of large institutions.

Currently, it seems that the direct reason for the market decline may be the concentrated sell-off by long-term holders and miners. As for why this concentrated sell-off is happening at this time, it may simply be a coincidence. From another perspective, the increasing diversification of financial instruments in the Bitcoin market has also contributed to market volatility. Since the emergence of Bitcoin contract trading in 2017, an increasing number of complex financial derivatives have continued to emerge, exacerbating the volatility of Bitcoin prices.

Since there are no obvious risks, this drop is likely a good opportunity to increase positions. The sell-off by large holders has also provided other investors with the chance to enter at a low price.

In addition, the crypto market has welcomed two important pieces of news. Firstly, the launch of the Ethereum spot ETF may come sooner than expected, potentially being approved as early as early July. Secondly, a certain asset management company has applied to the SEC for the launch of a Solana ETF and indicated that it may be launched in 2025. From Bitcoin to Ethereum to Solana, crypto assets are being accepted by traditional markets at a faster-than-expected pace, which may bring significant incremental funds in the future.

Despite the current uncertainty in the macro economy and traditional financial markets, the crypto asset market demonstrates independence and resilience, expected to play an increasingly important role in diversified investment portfolios, providing investors with new growth opportunities.