New Round of Crypto Market Fluctuation: How Should Investors Respond?

After the approval of the Bitcoin ETF and the price breaking historical highs, the crypto market has once again experienced significant fluctuations. In early August, the total market value of cryptocurrencies shrank from 2.44 trillion USD to 1.99 trillion USD, with a maximum daily drop of 8.4%. The reasons for this pullback are complex, involving factors such as the global economy and poor U.S. employment data.

This once again verifies the close relationship between Bitcoin prices and macroeconomic and political factors. In the future, the Federal Reserve's interest rate cuts, the U.S. elections, the global market, and geopolitical issues will become important factors influencing the bull market. For ordinary investors, the market is still waiting for the driving force brought by native innovation.

What is the impact of interest rate cut expectations?

Although the expectation of interest rate cuts has been stimulating the crypto market, the situation may be different when the actual rate cuts arrive. CME data shows that the probability of a rate cut in September has reached 100%. From a macro perspective, rate cuts are beneficial for funds to flow from banks to high-risk investments.

However, the expectation of interest rate cuts has dominated market sentiment for some time, and an actual rate cut may only elicit a mild reaction. The key factor is still the context of the rate cut - if it occurs during an economic boom, the stimulus to asset prices is more pronounced; if a rate cut happens during a fragile economy, it may convey a negative signal.

Currently, the signs of a weak U.S. economy are evident, with the unemployment rate reaching a nearly two-year high. In the future, the impact of interest rate cuts on the crypto market may weaken, and short-term market fluctuations will continue. In the long run, as long as capital can flow freely, cryptocurrency remains one of the options for wealth preservation.

The Attitude of the Two Parties in the United States Towards Encryption Currency

As cryptocurrencies enter the center of the political stage in the United States, the attitudes of both parties have become an important factor influencing the market. Republican presidential candidate Trump stated that he would formulate a comprehensive encryption policy if elected. Meanwhile, the Democratic Party has a somewhat ambiguous stance on cryptocurrencies.

Regardless of who is elected, both parties are willing to establish a clear regulatory framework. The Democratic Party tends to strengthen regulation, while the Republican Party has a more open attitude. If the Democratic Party wins, it may be unfavorable for market growth in the short term, but beneficial for the incorporation of encryption into the mainstream financial market in the long term. If the Republican Party wins, it may be favorable for the market in the short term, but long-term regulatory support is still needed.

Bitcoin vs Gold: Which is more valuable?

In the recent market fluctuations, gold performed better than Bitcoin. However, looking at the data from the past decade, Bitcoin has been the best asset for 8 years, with a ten-year return rate of 18,719%.

The long-term bullish factors in the crypto market still exist. Global monetary easing policies are favorable for the rise of Bitcoin. The spot ETF has attracted a large influx of funds and is expected to welcome a new wave of institutional investment. Although short-term fluctuations are inevitable, the long-term outlook remains optimistic.

How can investors seize opportunities?

Despite the increased impact of macro factors on the crypto market, it is still full of opportunities as an emerging technology. Currently, the market lacks highly innovative projects and is susceptible to fluctuations caused by unexpected events. However, supported by multiple favorable factors, the market remains bullish in the long term.

For ordinary investors, dollar-cost averaging is a good choice. By investing a fixed amount at regular intervals, one can acquire more assets during fluctuations. Meanwhile, cryptocurrency has become an indispensable part of investment portfolios, and moderate allocation can help improve overall returns.

In the context of short-term Fluctuation and long-term bullish outlook, investors should reasonably control risks and improve capital efficiency. Consider using tools such as deposit interest to focus on compound interest strategies, gradually building positions and choosing suitable times to buy the dip. Regardless of the strategy, scientific analysis and risk awareness are key to profitability.