Author: Biupa-TZC, @biupa

In addition to the market openings and technical indicators that I have been paying attention to, a gray line that affects the trend of the currency circle is the macro. Knowing history will help us understand the rise and fall, and reviewing the past will help us judge the future market.

1. Initial bull market, 2023-818-March 2024

Federal Reserve meeting time in the second half of 2023:

July 26, September 2, November 1, 12 On March 13th, remember four time points first

I think the beginning of this bull market will be after 818 in 2023. 818 is a washout, and the timing of its appearance is very clever.

July 2023 will be the last time the Federal Reserve raises interest rates in this cycle (we didn’t know it was the last time at the time), and the next FOMC meeting will be in September 2023. At that time, in September 2023, it was generally predicted that there would be no interest rate hike (the market would not be able to bear the continuous increase), but the dot plot in September predicted that there would be an interest rate hike in 2023 (it was generally expected to be in November).

The turning point occurs between September and November.

First, the West has taken the lead in cutting interest rates (high interest rates cannot be sustained). The second is that various data in the United States are going well. The third is the tightening of financial conditions (reflected in the sharp drop in the Nasdaq). During this period, market expectations have changed from "there will still be one interest rate hike in 2023" to "no more interest rate increases in 2023 - and at the same time, interest rate cuts will begin in 2024 (most forecasts for interest rate cuts will begin in May 2024)."

Finance is all about hype.

Before the Fed pivoted in November, traders had generally begun betting on a halt to interest rate hikes and started buying - a shift in expectations that caused a shift in market risk. The currency circle’s own news also has expectations for the adoption of ETF. The combination of the two created a bull market in which the currency circle bottomed out and began to rise in October.

There was only one washout in this round of rise, which was the gray market crash after the ETF was launched in January. It then continued to rise to its peak in March. The peak in March, looking back now, there are still many signs to judge that it was the top. The macro aspect also saw a huge turning point in March

2. The bullish to bearish shake-up, March 2024 to August 2024

The Federal Reserve meeting time in the first half of 2024:

January 31, March 20, April 30, June 12, July 31

In January 2024, there was no lack of optimism in the market, believing that interest rate cuts might begin in March 2024 . (If this is true, we may directly start an epic bull market)

The CPI and PPI rebounded in February and March, extinguishing the desire to cut interest rates in March. After the March meeting, the market generally bet on an interest rate cut in June or July.

The CPI for March, released on April 16, once again exceeded expectations, and the unemployment rate also reached a record low, making the possibility of interest rate cuts in June and July significantly reduced. The market generally believes that the interest rate cut will be postponed to September.

From being super optimistic in January (predicting an interest rate cut in March), to being delayed but optimistic in March (predicting an interest rate cut in June), to becoming significantly more uncertain in April (predicting an interest rate cut in September) , the market has gone completely bearish since then, and I think that since March, bookmakers have generally entered shipping mode. Whether it is predicted from March to June, or from April to September, the time required to maintain the currency price at a high level is too long, so bookmakers generally choose to ship after March. After the Ethereum ETF news pulled up on May 20, it was the last chance to escape.

414 is a black swan event similar to 314 519. But how the market reacts after a black swan event still depends on the macroeconomics. For example, after 314, the market started a vigorous bull market, but 414 brought a long period of negative fluctuations. In the final analysis, the deterioration of interest rate cut expectations brought about violent shipments by market makers, so every rebound is an opportunity for market makers to ship. The high and low points of the copycat also decrease in sequence (top on March 13th > top on May 20th > top at the end of July > top at the end of August).

The market was relatively deserted in June and July. Although Bitcoin still had a chance to rise back to 70,000, the performance of the copycats was very average. Additional macro events in July were Trump’s assassination and Trump’s participation in the Bitcoin Conference speech. These two events triggered a rebound in July. Otherwise, we have reason to believe that after the 520 rebound, it should fluctuate at a low level throughout June and July until the pin is inserted on August 5.

On August 5, the Bank of Japan unexpectedly raised interest rates, which brought about macro negative events. U.S. stocks, Japanese stocks, and the currency market all suffered a violent crash. I think this bad event is similar to 818 in 2023, marking that the market wash has reached a low point, and at the same time brewing hopes for the next stage.

3. The bull market brought about by interest rate cuts, September 2024 to December 2024

FOMC meeting in the second half of 2024: September 18, November 7, December 18

9 There are many interpretations of this month’s interest rate cut. First, inflation continued to improve from May to August (CPI in May was expected to be 0.4, take-home value was 0.3; in June, it was expected to be 0.1, take-home value was 0; in July, it was expected to be 0.1, take-home value was -0.1; both August and September were in line with expectations). The second is the market’s long-held expectation of an interest rate cut in September. Third, the sharp drop on August 5 caused “financial conditions to become tight again.” Therefore, a rate cut in September is expected.

What is more surprising is that it dropped by 50 basis points in September. September brings a lot of surprises. On the one hand, the 50-point drop in September VS the market forecast of 25 points. The second aspect is that interest rates are expected to continue to be cut in November and December, which is 100 points for the whole year vs. 75 points predicted by the market.

The unexpected good news in September gave a great boost to the currency circle. After September 18th, neither Shanzhai nor Bitcoin had any major corrections like 414 5175 85 95 (these are all dates, you can look back and analyze by yourself), but maintained an overall upward trend.

The currency circle took off completely after Trump was elected on November 5. This is a period of separation.I won’t repeat our recent history (it’s still fresh in everyone’s memory).

4. Where to go in 2025?

Judging from the above three periods of history, we also realize a truth - the market is swinging. The market will undergo a correction due to over-optimism, and the correction will bring pessimism. The over-pessimistic market will be rescued by the Federal Reserve, and after the rescue, it will enter over-optimism again - the market is in such a swing.

With the take-off from September to December, the FOMC on December 18 once again ushered in a turning point. Although interest rates were still cut in December, expectations for 2025 were significantly revised. Originally, in September 2024, it was expected that there would be 4 interest rate cuts in 2025, but in December 2024, the expectation was reduced to 2 times (here refers to the dot plot). At the same time, the date of the first interest rate cut in 25 years has also been significantly postponed from January to March (currently March and May have probabilities)

4 times → 2 times, January → March , although we are still in an interest rate cutting cycle, the slowdown in the rate of interest rate cuts also constitutes a negative. Therefore, it is not difficult to understand the short and rapid decline of the No. 18-20 copycat. In my opinion, this is very similar to the situation after March. However, because there is no black swan, it is just a correction within the currency circle, and the magnitude is not as tragic as 414.

At this moment (January 5, 2025), we are at the moment of the first rebound after a market washout of about two weeks. Some people see an escape wave (wave C then drops to 86,000), while some see the start of the mountain season. I currently believe that in addition to the market data, it will largely depend on the FOMC meeting on January 28-29, as well as various macro data released in the rest of January.

First of all, the remaining data in January include

the unemployment rate on January 10 and the non-farm payrolls

PPI on January 14

CPI on January 15

Based on these data, the market will form expectations for the first interest rate cut in January/March/May. If the data is better ("good" here means good for us), then the probability of a rate cut in March is higher/the number of rate cuts expected throughout the year is higher. (An interest rate cut in January is still considered a small probability event, so the main game is March VS May)

At the same time, there is also a dot plot in March - which means that March will give the expected number of interest rate cuts throughout the year. If the data in January is positive and very dovish rhetoric is given in January, then expectations of an interest rate cut in March will increase, and the bull market is likely to continue. If the interest rate cut is postponed to May, it is likely that the market will start to fluctuate in the range until April.

At the same time, the dot plot is also very important - if the dot plot in March gives an estimate of more than 2 times throughout the year (currently it is given twice in December, if it can be reduced again in March) 2-3 times), it will also be regarded as a positive. Therefore, if the FOMC in January and March are in line with our wishes, there may be a long-term pullback from January to May, which is the so-called mountain season.

On the contrary, if the FOMC in January is not in line with what you want, nor is it in March, and only cuts interest rates once in May, thenThe market may have fluctuated at a low level from January to April (the possibility of a washout at 86,000 cannot be ruled out), rebounded in April to around the time of the interest rate cut in May, and then continued to fluctuate in June (similar to the trend from April to August 2024).

As for whether the copycat can reach new heights. I can say that illiquidity is an excuse to explain the decline, but it is not the real reason for the decline. The real reason for the decline is "expectation to fall", while the reason for the rise is also "expectation to rise". The market value of USDT in 2021 will be only half of its current value, but it can still support the Shansai bull market. This round is no surprise. As long as there are "expectations", although Shansai cannot rise 100 times, it is no problem to exceed the 2021 high by 50%-100%

In addition, there is another complicated variable that is the Trump factor. The Trump factor is the main reason for the skyrocketing price of BTC starting in November. (Although in my opinion, it only affects the degree, not the direction)

Trump officially came to power on January 20. Trump’s impact on the market is manifold. First, other economies may take the form of direct interest rate cuts to stimulate the stock market and economy. Second, his policy may lead to a recurrence of inflation. In December, Powell's suppression of the 25-year forecast also took Trump into account. Third, his direct benefit to the currency circle may lead to direct pullbacks for some beneficiary currencies (rather than "macro causes liquidity, which causes XX, which causes YY, which causes ZZ, which causes an increase" - but a simple and crude direct pull). .

Therefore, Trump’s topic is a very grand topic, and it is difficult to explain clearly in a few words the pros and cons of competition. After the general direction is confirmed, you can focus on Trump-related currencies when selecting currencies (which will rise more and fall less).

There is not much we can do next. On the one hand, we will wait and see what happens, and on the other hand, we will respond in a timely manner to the variables that will arise in the future. If everything goes well, maybe "the big one is really coming." If not, maybe we will return to the shock from April to August last year. No matter which situation occurs, the only way to solve it is to be mentally prepared so that you can take the correct approach to deal with it when it actually occurs.