Fed Rate Cut Expectations and New Opportunities in the Crypto Market

Recently, there has been a divergence in U.S. economic data, leading to controversy in the market regarding the Fed's interest rate cut policy. The June CPI data shows that inflation has eased, with the May CPI increasing by 3.3% year-on-year, which is lower than expected; the core CPI increased by 3.4% year-on-year, reaching a new low in over three years. However, the May non-farm employment data exceeded expectations, reaching 272,000, higher than analysts' predictions.

The divergence between inflation and employment data makes it difficult for the market to reach 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%. The Fed's dot plot shows that 11 committee members believe that interest rates will remain above 5% this year, while 8 committee members believe it could drop to between 4.75% and 5%.

Despite the uncertainty surrounding interest rate cuts, the market seems to have begun betting on a rate cut by the Fed. U.S. Treasury yields have been on a downward trend in recent months, and gold prices have been consolidating at high levels, indicating an increasing risk appetite for funds.

The overall US economy is improving, with the latest Markit Manufacturing PMI at 51.7 and the GDPNow model forecasting a second-quarter GDP growth rate of 3.0%. Investors can patiently wait for inflation to ease and the Fed to cut interest rates.

The AI boom has driven US stocks to new highs repeatedly, but the market is showing severe divergence. The difference between the return of the S&P 500 index and the breadth indicator has reached a 30-year extreme, indicating that funds are concentrated in a few large-cap stocks. This phenomenon may increase the overall risk in the market.

In the crypto market, despite a favorable macro environment, there was an unwarranted decline in June. Bitcoin fell to a low of below $58,500, while Ethereum dropped to around $3,240. The main reason for the decline may be the concentrated selling by old OGs and miners, who have sold approximately $4.1 billion.

However, the outlook for the crypto market remains optimistic. The Ethereum spot ETF is expected to be approved in early July, and VanEck has also applied for a Solana ETF. The diversification of these financial instruments will help push crypto assets into the mainstream, potentially bringing significant incremental capital.

Overall, despite the increased volatility in the short term, the long-term development trend of the crypto market remains positive. With more traditional financial instruments entering the encryption space, the market is expected to gain new growth momentum and stability. For investors, the current market adjustment may provide a good entry opportunity.