Macro research report on crypto market: The Federal Reserve keeps interest rates unchanged, liquidity turning point has reached, and Bitcoin may bottom out and rebound

1. Interpretation of the Federal Reserve's interest rate meeting: Policy

stability maintenance, market expectations adjustment

The Federal Reserve decided to maintain the target range of federal funds rate at 4.25%-4.50% at its latest interest rate meeting. This decision is in line with market expectations, but its policy wording, economic forecasts and guidance on future interest rate paths have had a profound impact on the market. This meeting not only revealed the Fed's latest judgment on the current economic environment, but also affected the market's expectations for future liquidity conditions, thus directly affecting the global asset market, including cryptocurrencies. Below, we will provide a detailed interpretation from the core content of the Federal Reserve’s resolution and its direct impact on the market.

**1.1. Core content of the Federal Reserve’s resolution: Maintaining

policy stability, but sending out signals of easing**

The Federal Reserve decided to keep the benchmark interest rate unchanged at this meeting and emphasized in its post-meeting statement that "the policy stance remains restrictive to ensure inflation returns to the 2% target." This statement shows that the Fed still believes that the current inflation level is not enough to support an immediate rate cut, but the wording of the resolution has softened compared to the past few meetings. For example, in previous meeting statements, the Fed repeatedly emphasized "restrictive policies that require longer", but at this meeting, this statement was weakened, instead emphasizing that future decisions will be adjusted based on economic data. This change is interpreted by the market as the Federal Reserve is preparing for future policy shifts.

In addition, the Fed has slightly lowered its GDP growth forecast in its latest economic forecast and raised inflation expectations in the coming years, showing that policymakers are weighing the contradiction between the slowdown and inflation stickiness. For example, the Fed expects U.S. GDP growth to be lowered to 1.8% in 2025 from 2.1% previously forecast, while the core PCE (the Fed favored inflation indicator) rose from 2.2% to 2.4% in 2025. This forecast adjustment reflects the Fed's cautious attitude towards the future economic situation, that is, despite slowing economic growth, inflation still has a certain stickiness, so there will be no rash interest rate cuts in the short term.

Another key point worth paying attention to is the Fed's balance sheet policy. Since the start of balance sheet reduction in June 2022, the Federal Reserve has reduced its Treasury bonds by up to $60 billion and $35 billion MBS per month. At this meeting, the Federal Reserve announced that the pace of balance sheet reduction will be reduced from US$60 billion to US$50 billion. Although this adjustment is not large, it sends a signal that the liquidity tightening cycle is about to slow down. The Fed's balance sheet shrinkage is an important factor affecting market liquidity because it directly determines the supply of US dollar in the market. In the past two years, due to the Fed's tightening policy, a large amount of liquidity has been pulled out of the market, which has put pressure on the US stock market and crypto markets. The slowdown in the pace of balance sheet reduction means that the Fed may be preparing for future liquidity easing.

Dot Plot is one of the important tools for the market to interpret the Fed's policy direction. At this meeting, the dot plot shows that the median interest rate forecast for FOMC members in 2025 is 3.75%, which means at least two rate cuts. Although this expectation is basically consistent with the market's previous expectations, there are still differences in details. Some officials expect to start rate cuts as early as the fourth quarter of 2024, while others believe that interest rates will be cuts in mid-2025. This difference shows that there are still different views on inflation stickiness within the Federal Reserve, which will also lead to greater uncertainty in future policy paths.

Overall, although the Fed's decision at this meeting kept interest rates unchanged, it sent out a series of loose signals: softening the wording, slowing down balance sheets, lowering economic growth expectations, and a dot-matrix chart showing the path to interest rate cuts. These factors combined have led the market to re-evaluate the future monetary policy environment and directly affect the asset price trend.

**1.2. Direct impact of Federal Reserve policy on the market: liquidity

turning point is approaching, risky assets usher in a turning point**

The impact of the Federal Reserve's policy adjustment on the market can be analyzed from multiple dimensions, especially the US dollar index (DXY), US Treasury yields, stock markets and cryptocurrency markets. After the announcement of this resolution, the market's immediate response indicated that investors' expectations for improvement in liquidity were increasing, which also indicates that high-risk assets such as Bitcoin may usher in a rebound cycle.

First, the US dollar index (DXY) fell sharply. The US dollar index is an important indicator for measuring the flow of global capital. The dollar index quickly fell back, marking its biggest single-day drop since 2023 after the Fed hinted that a pace of tightening could slow in the future. A weaker dollar usually means global capital is more willing to flow into high-yield assets, which supports risky assets such as U.S. stocks, gold and Bitcoin. In the past two years, the US dollar index has remained strong due to the continued interest rate hikes in the Federal Reserve, causing capital to flow out of emerging markets and risky assets to be under pressure. Now, with the change in the Fed's policy tone, the market has begun to expect the strong cycle of the US dollar to end, which will help crypto assets such as Bitcoin usher in more capital inflows.

Secondly, US Treasury yields declined, and the turning point of interest rate expectations emerged. Changes in U.S. Treasury yields are usually seen as market predictions of future interest rate environments. After the Fed meeting, the 10-year Treasury yield fell from 4.3% to 4.1%, indicating that the market is digesting the possibility of future interest rate cuts ahead of schedule. For stock and crypto markets, lower U.S. Treasury yields mean lower capital costs, thereby increasing the attractiveness of risky assets. Historical data shows that when U.S. Treasury yields fall, Bitcoin tends to perform stronger because it means that the liquidity environment in the market is improving.

In the U.S. stock market, especially technology stocks and growth stocks, welcoming a strong rebound. The impact of the Fed's policy adjustments on tech stocks is particularly evident, as tech companies often rely on lower financing costs, and rising expectations for interest rate cuts have caused investors to re-invest these stocks. The Nasdaq index rose more than 2% after the interest rate meeting, and the stock prices of growth companies such as Tesla and Apple also rebounded. This trend is a positive signal for the crypto market, because the correlation between technology stocks and Bitcoin has been increasing in recent years, and the linkage between the two in terms of capital flow has become increasingly obvious.

The crypto market responded equally quickly. Bitcoin price rose more than 5% in the short term after the Fed's resolution was announced, breaking through the key resistance level of $85,000. Mainstream currencies such as Ethereum also rose simultaneously, reflecting that market expectations for liquidity easing are strengthening. If the Fed further releases loose signals in the next few months, Bitcoin may usher in a new round of rising markets and may even break through the previous highs.

Overall, although the Federal Reserve's policy resolution did not immediately adjust interest rates, the signals released have far-reaching impact on the market. The weakening of the US dollar, falling U.S. Treasury yields, rising technology stocks, and a rebound in Bitcoin all indicate that the market is gradually adjusting its expectations for liquidity. For investors, this means that the liquidity turning point may be approaching, and high-risk assets such as Bitcoin may usher in a new round of upward cycle.

2. Market macro background: liquidity turning point has reached, and

funds may return to risky assets

Over the past two years, global financial markets have experienced an unprecedented round of liquidity tightening. The Federal Reserve has started a cycle of interest rate hikes since March 2022 and implemented large-scale balance sheet reduction (QT) at the same time, causing drastic changes in the capital environment in the global market. This policy has led to a decline in US dollar liquidity, an increase in capital costs, and a sharp correction in the prices of risky assets. As a high-risk and highly elastic asset class, Bitcoin has encountered severe market volatility in the process. However, as the Federal Reserve slows down its balance sheet shrinking in 2024, the flow of market funds is undergoing subtle changes, and the liquidity turning point may have quietly arrived.

**2.1. Recent liquidity environment analysis: The turning point of

market funds has emerged, and a large amount of off-market funds are waiting to enter the market**

Against the backdrop of collective tightening of global central banks from 2022 to 2023, market funds tend to be conservative and risky assets valuations are severely suppressed. However, multiple data indicators since 2024 show that the liquidity environment is changing. Recent analysis by Coinbase research team believes that Bitcoin may bottom out and rebound in the next few weeks, and its main basis is as follows:

First, the pace of global liquidity tightening is slowing down. In the past two years, due to the interest rate hikes by major central banks such as the Federal Reserve and the European Central Bank, the global financial market has experienced serious capital outflows and deleveraging, resulting in pressure on the stock market and the crypto market. However, at the March 2024 interest rate meeting, the Fed made it clear that the pace of balance sheet reduction will slow down and the dot chart shows that there may be 2-3 interest rate cuts in the next 12 months. This means that the tightening of restrictive monetary policy in the past two years is weakening, and market liquidity may improve.

Secondly, the linkage between the US stock market and the crypto market has increased, and the crypto market is more sensitive to changes in macro liquidity. The 90-day rolling correlation between Bitcoin and U.S. stocks (especially the Nasdaq Index) once reached a high of 0.75 in 2024, showing that the linkage between the two has been significantly enhanced. In other words, the performance of tech stocks has an increasingly greater impact on Bitcoin, while tech stocks are extremely sensitive to interest rates. With the market adjusting its future policies to the Federal Reserve, technology stocks have begun to rebound, and this trend is likely to drive the prices of crypto assets such as Bitcoin to recover.

In addition, the rise in risk aversion among investors has led to institutions reducing the allocation of crypto assets, but the market structure is still healthy. In the second half of 2023, due to the rapid rise in US Treasury yields, the market's expectations for long-term high interest rates have caused most institutional investors to reduce their allocation to crypto assets. Hedge funds and traditional institutions have turned their funds to low-risk assets such as short-term US Treasury and money market funds, resulting in a decline in liquidity in the Bitcoin market and a decrease in trading volume. However, it is worth noting that there are no systemic risks in the market, the structure of the crypto market is still relatively healthy, and the market's capital inflow to BTC spot ETFs remains stable, indicating that institutions are still looking for a suitable entry time.

The most critical point is that the total balance of the stablecoin market has increased to US$229 billion, indicating that off-market funds are accumulating and waiting for entry. Historical data shows that the supply of stablecoins is closely related to the flow of funds in the crypto market. When the total market value of stablecoins grows, it often means that the crypto market is about to usher in new incremental funds. Currently, the total balance of USDT (Tether) and USDC has continued to grow since the end of 2023, showing that a large amount of funds are on the sidelines. Once the market trend is determined, these funds may quickly flow back to Bitcoin and other crypto assets.

Overall, although the crypto market is still affected by macroeconomic uncertainty, the pressure on global liquidity tightening is weakening, and there is still a large amount of funds waiting to enter the market. If the Fed continues to release dovish signals in the coming months and global capital liquidity improves, the crypto market is expected to usher in a new rebound cycle.

**2.2. The relationship between US dollar liquidity and crypto market:

historical data reveals BTC trend rules**

Judging from historical data, the tightness of US dollar liquidity is highly correlated with the performance of the Bitcoin market. Specifically, in the environment of low interest rates and loose monetary easing, Bitcoin often ushers in a sharp rise, while in the context of high interest rates and tightening policies, Bitcoin faces huge pressure. We can split this trend into the following three stages:

Phase 1: 2017-2021 - Loose cycle drives the BTC bull market

From 2017 to 2021, the Federal Reserve maintained low interest rates and QE (quantitative easing) policies, and global market liquidity was extremely abundant. At this stage, institutional investors' interest in risky assets increased significantly, and Bitcoin ushered in two bull markets:

In 2017, the price of BTC rose from US$1,000 to US$20,000, an increase of more than 20 times.

From 2020 to 2021, the Federal Reserve adopted zero interest rates + unlimited QE due to the epidemic, and the price of Bitcoin soared from $4,000 to $69,000, setting a record high.

Phase 2: 2022-2023 - BTC drops sharply due to tightening policy

In 2022, the Federal Reserve raised aggressive interest rates (11 interest rates hikes in total, increasing interest rates from 0.25% to 5.5%) and implemented large-scale balance sheet reduction simultaneously, resulting in a global liquidity tightening. As a high volatility asset, Bitcoin suffered a sharp pullback during this period, with a drop of more than 60% throughout the year. Institutional investors withdrew and market trading volume dropped sharply.

Phase 3: 2024-2025 - Balance sheet shrinkage slows down, BTC ushers in recovery

As the Fed slows down its balance sheet size in 2024, market liquidity is ushering in signals of improvement. Historical experience shows that when liquidity pressure eases, BTC will enter a new round of upward cycle as market funds flow back. If the Fed starts cutting interest rates or adopts a looser policy by 2025, Bitcoin may usher in a bull market based on a rebound in liquidity.

At present, the Federal Reserve is in a critical stage of policy shift. Although it has not yet entered a cycle of interest rate cuts, signals such as slowing down balance sheet shrinkage, falling US dollar index, and growing stablecoin balances all indicate that the liquidity turning point has appeared. If the Fed continues to release loose signals in the next few months, the crypto market is expected to attract more funds to flow back, and Bitcoin, as a liquidity barometer in risky assets, will take the lead in benefiting and usher in a new round of rising market.

3. Bitcoin market outlook: possibility and risk factors for bottoming

out rebound

The recent price fluctuations in the Bitcoin market, institutional capital flows and macroeconomic environment all indicate to a certain extent that the market may be in the bottoming stage and is expected to rebound against the backdrop of a rebound in liquidity. However, investors still need to be wary of uncertainties in the market, including the direction of the Federal Reserve's policy, geopolitical risks, and potential risks within the crypto market.

**3.1. Analysis of Bitcoin’s short-term price trend: Bottom-building

signal enhances, technical aspects show rebound potential**

From a technical analysis perspective, Bitcoin’s recent market trend shows signs of enhanced bottom support, and multiple technical indicators indicate that the market may be approaching the turning point.

First, the key support level $76,000 - $80,000 forms the bottom of the market.

Bitcoin price has tested the $76,000-$80,000 range several times over the past few weeks, but failed to effectively break below, indicating strong buying support in the region. Judging from historical data, this range is also the cost area for a large number of BTC spot ETF funds to enter the market, and the intervention of institutional funds has strengthened the support. In addition, on-chain data analysis shows that there is a accumulation of UTXO (not spent transaction output) for long-term holders in this range, indicating that the holders are confident and there is no large-scale panic selling.

Secondly, RSI (relative strength index) rebounded and market momentum recovered.

RSI indicators (relative strength index) are commonly used to measure the overbought or oversold market conditions. When the RSI is below 30, the market enters an oversold state, which means a possible bottoming out and rebound. Recently, the Bitcoin RSI indicator has rebounded from around 30 to the range of 45-50, indicating that the market momentum is recovering and the bullish force is gradually increasing. In addition, the RSI rebound is usually accompanied by gradual stabilization of prices, indicating that market buying is increasing.

Third, trading volume gradually increases and market liquidity rebounds. In the bottoming stage, changes in trading volume are crucial. Recently, Bitcoin's trading volume in key support areas has increased, indicating that market buying is intervening rather than simply selling. During the low fluctuations in the past few weeks, Bitcoin's trading volume has gradually increased, meaning there are signs of capital inflows in the market. Once market sentiment turns optimistic, incremental funds may accelerate the push of Bitcoin out of the volatile range.

Overall, if the Fed maintains its current monetary policy unchanged and market liquidity further recovers, Bitcoin may maintain a volatile bottoming structure in the short term and usher in a rebound in the second quarter.

**3.2. Market trends of institutional investors: Inflow of funds

strengthens market support**

The trends of institutional investors play a crucial role in the medium- and long-term trends of the Bitcoin market. In recent years, with the launch of Bitcoin spot ETFs, more and more traditional financial institutions have participated in the Bitcoin market, and their capital flow has become an important weather vane for market sentiment.

First, Grayscale BTC holdings remained stable and there was no large-scale selling. As one of the world's largest Bitcoin trust funds, Grayscale's BTC holdings are regarded as an important indicator of the market. In the first quarter of 2024, Grayscale BTC holdings remained stable and there was no large-scale outflow of funds, indicating that institutional investors did not panic and sell due to short-term market volatility. In contrast, in the past few years, when the market fluctuates extremely volatility, the outflow of Grayscale Fund usually exacerbates the decline in Bitcoin prices. In this round of adjustments, Grayscale's position stability has increased, indicating that institutional investors are still optimistic about the long-term value of BTC.

Secondly, the flow of funds from Bitcoin spot ETFs shows that institutions are increasing their holdings of BTC. Bitcoin spot ETF is one of the most important channels of capital inflows in the market in 2024. Institutional investors are still buying stocks on dips. This is in stark contrast to the large-scale outflow of funds during the Fed's tightening cycle from 2022 to 2023. The continuous inflow of ETF funds not only provides market buying support, but also enhances market confidence in the long-term trend of BTC.

Third, MicroStrategy continues to increase its holdings in BTC, and institutions maintain confidence in long-term value. As one of the world's largest corporate BTC holders, MicroStrategy has recently increased its holdings of BTC again, with its total holdings exceeding 214,000 BTC. This shows that despite the large short-term market volatility, some institutional investors are still willing to hold BTC for a long time and regard it as an important asset allocation tool. MicroStrategy's share increase not only boosted market confidence, but also sent signals to other institutions that the long-term investment value of BTC.

Overall, the continuous inflow of funds from institutional investors provides strong medium- and long-term support for BTC prices and enhances the market's rebound momentum.

**3.3. Possible market risks: Uncertain factors still exist, so beware

of sudden impacts**

Although the market is showing signs of bottoming out and rebounding, there are still multiple risk factors that may affect Bitcoin’s short-term trend.

First, the uncertainty of the Federal Reserve’s policy. Although the market generally expects the Fed to cut interest rates in the second half of 2024, if inflation data rebounds, the Fed may delay interest rate cuts or even further tighten liquidity. For example, if the future CPI (Consumer Price Index) data rises beyond expectations, the Federal Reserve may turn to a hawkish stance, resulting in worsening market sentiment and under pressure on risky assets. In this case, Bitcoin may face further adjustment pressure.

Second, global geopolitical risks may affect investors' risk preferences. In recent years, the impact of geopolitical events on financial markets has been increasing. For example, the Russian-Ukrainian conflict, tension in the Middle East, and instability in the Asia-Pacific region will all affect the risk appetite of global investors. If the market risk aversion sentiment rises, funds may flow to traditional safe-haven assets such as U.S. bonds and gold, while high-risk assets such as Bitcoin may encounter short-term selling pressure.

Third, liquidity risks within the crypto market. In addition to macroeconomic factors, there may also be potential risks within the crypto market. For example, if some exchanges experience liquidity problems or clearing risks, it may cause short-term violent fluctuations in the market. In addition, if large institutional investors sell BTC due to liquidity demand, they may also have an impact on the market. Therefore, investors still need to pay close attention to on-chain data, exchange capital flows and leverage in the derivatives market to determine whether there are potential risks in the market.

At present, the Bitcoin market is in a stage of strengthening bottom support, inflow of institutional funds, and improving liquidity environment. The market is waiting for new catalysts to push prices to break through the fluctuation range. However, investors still need to be wary of Fed policy uncertainty, geopolitical risks, and internal liquidity risks of crypto markets, which may affect the short-term trend of the market.

From the overall trend, if market liquidity continues to improve and institutional funds continue to flow in, Bitcoin is expected to usher in a rebound in the second quarter. However, the market may still maintain a volatile trend before the key resistance level is effectively broken. Investors need to pay close attention to macroeconomic data, ETF capital flows and market trading volume in the next few months to determine whether Bitcoin has entered a new round of upward cycle.

4. Investment Strategy and Conclusion

In the current market environment, investors should adjust their respective investment strategies based on different investment styles, risk tolerance and understanding of the market. The continued stability maintenance of Federal Reserve policies, the gradual improvement of the liquidity environment, and the rebound signal of the Bitcoin market all provide investors with different opportunities and challenges. In order to achieve better investment returns in this volatile market, investors must make flexible strategies and pay close attention to changes in the macroeconomic and market trends.

4.1. How should investors deal with the current market?

Strategies of short-term traders: For short-term traders, the market is highly volatile, and technical analysis is particularly critical. In the short-term fluctuations in Bitcoin prices, the key support level of $80,000 is a very important reference point. If the Bitcoin price falls in this area, short-term traders should consider short-term stop loss to avoid the risk of loss caused by further market downturn. Meanwhile, once the market shows signs of stabilization, short-term traders can wait for the Bitcoin price to break through the $88,000 area and be confirmed, and then they can increase their positions to provide profit opportunities for subsequent price increases.

However, short-term trading is at high risk, especially when the liquidity of the crypto market is still not completely stable, so traders should strictly set stop loss points to avoid excessive exposure. The technical signals of the market, especially when prices break through key resistance ranges, can help short-term investors grasp the short-term price fluctuation trend. In addition, short-term traders should closely monitor the release of macroeconomic events, such as U.S. non-farm data, CPI and Fed policy meetings, which will have a significant impact on market volatility.

Strategies for medium and long-term investors: For medium and long-term investors, the current market still has great upward potential, especially as the liquidity environment gradually recovers. Compared with short-term traders, medium- and long-term investors can wait for the opportunity for the market to rebound more patiently. The current Bitcoin price may be in a relatively bottom area, and the liquidity inflection point of the market has arrived. Medium and long-term investors can build positions in batches when the price pulls back, gradually accumulating assets, especially near key support areas (such as the $88,000-$83,000 range), which will lay a solid foundation for future rebounds.

As the Fed slows down its balance sheet and market liquidity gradually improves, medium and long-term investors are expected to benefit in the future rebound cycle. When building a position, investors should pay attention to the long-term trend of BTC and changes in market sentiment, and avoid the impact of severe fluctuations in short-term market sentiment on investment decisions as much as possible. As the Bitcoin market gradually recovers confidence, medium and long-term investors will receive relatively stable returns.

Strategies of institutional investors: Institutional investors usually have stronger financial strength and risk management capabilities, so their investment strategies often focus on the accumulation of long-term value and adopt relatively conservative operating methods. In the current market environment, institutional investors should pay close attention to changes in the Federal Reserve's policy, especially the possible signals of monetary easing in the future. If the Fed decides to increase monetary easing or cut interest rates, this will bring more inflows to risky assets, including Bitcoin.

Meanwhile, institutional investors can consider long-term holdings of Bitcoin and Ethereum to hedge the risk of the depreciation of the US dollar. Bitcoin and Ethereum, two of the most liquid crypto assets, have gradually become key components of institutional asset allocation, and this trend may accelerate as the crypto market matures. By holding these crypto assets, institutional investors can not only obtain rich returns when prices rebound, but also avoid potential risks of traditional financial assets, such as inflation and uncertainty in global markets.

4.2. Future market outlook

Judging from the overall market performance, with the gradual stability of the Federal Reserve's policies and the recovery of the liquidity environment, the possibility of Bitcoin's short-term rebound and medium- and long-term rise has gradually increased. Although the market is still facing the impact of risk factors, especially macroeconomic uncertainty, geopolitical risks and potential liquidity issues in the crypto market, the expectation of loose policy in the Federal Reserve and the continued inflow of institutional investors' funds have still brought new opportunities to the Bitcoin market.

First, the prospects for improvement in market liquidity are clear. As the Fed's balance sheet shrinkage slows, market liquidity is expected to gradually recover, especially the loose trend of the US dollar in the short term may provide more capital flow into risky assets. Bitcoin’s historical trends show that in an environment where US dollar liquidity is loose, BTC often performs stronger. Therefore, with the improvement of the macroeconomic environment, Bitcoin is expected to rebound in the next few weeks and provide investors with profit opportunities.

Second, Bitcoin is expected to enter a new round of upward cycle. Supported by the liquidity environment, the price of Bitcoin may break through the target area of ​​$85,000 - $88,000, ushering in a new round of upward cycle. However, this process may also face technical fluctuations and consolidation, and as prices break through key resistance levels, the market still needs to face repeated fluctuations in capital allocation and market sentiment.

Third, market risks still exist. Although the market is expected to recover, investors still need to pay attention to the fine adjustment of the Federal Reserve's policy and changes in the global economy. In particular, rebound in inflation or intensifying international conflicts may lead to the Federal Reserve's re-tightening of monetary policy, which will put pressure on risky assets such as Bitcoin. Therefore, investors must remain alert, pay close attention to market dynamic changes, and adjust their investment strategies in a timely manner.

Overall, against the backdrop of the Federal Reserve's policy maintenance and the gradual improvement of the liquidity environment, the Bitcoin market has a relatively optimistic prospect, but the market volatility is still large. Investors should make reasonable asset allocation based on their own risk tolerance and market trends.