Is the Federal Reserve's interest rate cut in June a done deal?

Author: SuperEx

Compiled: Vernacular Blockchain

Recently, the global market was shocked by the violent fluctuations in the U.S. stock market. After the "reciprocal tariff" news triggered a market crash, the White House announced a 90-day suspension of tariffs on certain countries, causing the market to quickly reverse and soar.

The Dow Jones Industrial Average soared over 2900 points, up 7.87%, marking the largest single-day increase since March 25, 2020. The S&P 500 Index rose 9.52%, the largest increase since October 29, 2008, while the Nasdaq Index skyrocketed 12.16%, recording its second largest single-day increase in history.

The "seven tech giants" stocks surged across the board, with their total market value skyrocketing by $1.85 trillion in just a few hours.

"The US stock market is as volatile as altcoins, and the world has become a huge pump and dump game."

This rhythm seems familiar, that's right—it's exactly the kind of extreme price fluctuations we often see in the altcoin market. Many market analysts can't help but exclaim:

However, the surprises from the United States did not stop there. The March CPI data was far below expectations: the year-on-year increase was only 2.4%, lower than market forecasts, and it even decreased by 0.1% month-on-month. The core CPI was equally disappointing, reaching a four-year low. The unadjusted core CPI year-on-year increase for March was 2.8%, falling for the second consecutive month, the lowest level since March 2021, and below the market expectation of 3.0%.

These two sets of data not only caught the market off guard but also prompted investors to reassess the Federal Reserve's policy outlook. The market reacted quickly:

Spot gold initially rose by $6, then retreated;

The US dollar index fell 20 points in the short term.

The British pound against the US dollar has increased by 1.00% during the day.

In light of such data, many market analysts now believe that a rate cut by the Federal Reserve in June is almost a foregone conclusion.

Harriet Torry, an economist at The Wall Street Journal, pointed out that under normal circumstances, a slowdown in the year-on-year growth rate of the CPI would be considered good news.

This is naturally good news for the cryptocurrency market. With the Federal Reserve's benchmark interest rate declining, the cryptocurrency market may usher in a new round of value reassessment.

Relative Pricing Effect of Low Risk-Free Interest Rates

The yield on the 10-year U.S. Treasury has fallen from a peak of 4.8% in 2023 to 4.28%, with a recent low of 4.18%, followed by a rebound of 10 basis points. The decline in the return on traditional fixed-income assets is driving capital towards higher-risk assets. For example, Bitcoin's correlation with Treasury yields has dropped to -0.73 in 2023. During a rate-cutting cycle, the opportunity cost of holding crypto assets is significantly reduced, enhancing their appeal. According to Goldman Sachs' model, for every 25 basis points cut in rates, Bitcoin's market cap could rise by 6-8%.

Strengthen the "Digital Gold" Narrative

The 90-day correlation between Bitcoin and gold rose from 0.12 in 2023 to 0.35, reaching 0.68 during the Silicon Valley Bank crisis. When interest rate cuts coincide with rising recession risks, the safe-haven value of crypto assets may be reassessed. A report from Grayscale ( indicates that for every 1% decline in real interest rates, the baseline valuation of Bitcoin could increase by 15%. Liquidity injection brought by interest rate cuts

Historically, periods of interest rate cuts by the Federal Reserve have often been accompanied by widespread increases in asset prices. With liquidity easing and capital costs declining, investors' interest in risk assets increases—this is especially evident in the crypto market.

As a highly volatile and high-risk tool, crypto assets are extremely sensitive to changes in liquidity. When the Federal Reserve signals monetary easing, idle capital tends to chase higher returns, and crypto assets with high return potential quickly become the focus.

Economic Logic of Deflationary Tokens

In the context of anticipated fiat currency devaluation, the scarcity premium of fixed-supply cryptocurrencies is becoming increasingly prominent. This inherent deflationary characteristic enhances the appeal against inflation during a rate-cutting cycle. Catalysts Used by Institutions

Interest Rate Cuts Amplify the "Asset Scarcity" Phenomenon

Lower interest rates have reduced the yields of traditional financial markets such as bonds and money market funds, creating pressure for institutions to reallocate. Long-term investors, such as insurance companies, pension funds, and family offices, may shift some capital toward growth-oriented emerging markets.

As regulatory infrastructures such as ETFs, custody, and auditing steadily mature, compliance investment in crypto assets is becoming increasingly viable. In the context of lackluster returns in traditional markets, institutions may consider including Bitcoin and Ethereum in diversified portfolios.

Crypto ETF Synchronizes with Interest Rate Cuts

By the end of 2024, the U.S. has approved multiple spot Bitcoin ETFs for listing, marking a key moment for institutional funds to enter the crypto market publicly. If interest rate cuts coincide with the ETF craze, the dual momentum of institutional inflows and macro liquidity expansion could further amplify the upside potential of the crypto market.

Revitalization of On-Chain Activities in the Crypto Ecosystem

DeFi Market Recovery

During the interest rate hike cycle, DeFi platforms struggled to compete with the low-risk returns of U.S. Treasury bonds, leading to a decrease in the total locked value ) TVL (. As the risk-free rate of return declines, DeFi returns become attractive again, drawing capital back.

Leading protocols such as Compound, Aave, and Lido have shown signs of TVL recovery. With stable on-chain borrowing rates and widening stablecoin spreads, capital efficiency has improved — enhancing the liquidity of the DeFi ecosystem.

NFT and GameFi markets are back in the spotlight

Interest rate cuts release capital and reignite user enthusiasm for highly volatile and highly participatory assets such as NFTs and GameFi Tokens. Historically, NFT market activity tends to lag behind Bitcoin's rise and explodes in the second phase of a bull market. The Federal Reserve's interest rate cut may open new upward space for these application-layer assets.

Conclusion

In summary, the Federal Reserve's interest rate cuts have laid the macro foundation for a new rising cycle in the crypto market. From liquidity injection, capital reallocation to institutional entry, on-chain activities, and financing environment — interest rate cuts provide a systematic tailwind for the crypto industry.

As the Federal Reserve opens the liquidity floodgates, crypto assets are evolving from marginal speculative assets to mainstream macro allocation tools. This shift is driven by traditional financial giants as well as technological breakthroughs, while being accompanied by a deep reshuffling of the market and a reconstruction of value.

Of course, the market will not change overnight. Regulatory transparency, technological infrastructure, and security challenges still need to be addressed. However, driven by the dual engines of "monetary easing + asset innovation," the crypto market may usher in a new structural rise in the coming year. For investors and builders, understanding the policy cycle and market rhythm will be key to navigating bull and bear markets.

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Source: Baihua Blockchain