Bitcoin price experienced a dip near $59,000 on October 10th, but soon began an upward trend. Just 5 days later, on October 15th, the price of Bitcoin reached around $68,000. Not only that, but many altcoins also started to surge, with SUI prices increasing by over 30% in just a few days, and some meme coins even seeing a surge of over 50%.
While the bull market is exciting, there are certain risks in the current cryptocurrency market that make people wonder if the sudden surge can be sustained. Will there be a sharp decline after the surge?
The rise in Bitcoin price is not primarily due to interest rate cuts. After reaching a low point of $59,000 on October 10th, the price of Bitcoin started to rebound. However, the reason for this surge seems unclear. After all, the Federal Reserve recently stated that the previous 50 basis point rate cut may have been a wrong decision. There are even traders betting on the possibility that the Federal Reserve will not continue to cut rates in the next meeting. It seems that the current market believes that only rate cuts by the Federal Reserve can provide more liquidity to the market and initiate an upward trend.
However, investors need to be aware that from the end of last year to the beginning of this year, the Federal Reserve did not cut interest rates. Yet, during that time, even in a high interest rate environment, the price of Bitcoin rose from around $20,000 to around $60,000. This is because injecting liquidity into the market does not necessarily have to be done through interest rate cuts. For example, if the Japanese yen is in a low-interest-rate environment while the US dollar is in a high-interest-rate environment, the interest rate differential between the two is large. Therefore, if investors borrow low-interest-rate yen and exchange it for US dollars to invest in high-yielding US dollar assets, it is almost a risk-free transaction and a major factor driving the bull market in Bitcoin earlier this year.
Therefore, interest rate cuts may not necessarily bring so much liquidity in the short term, and the real source of liquidity currently comes from the large interest rate differential between the US dollar and the Japanese yen. So if the USD/JPY exchange rate grows, indicating a widening interest rate differential between the two, it is more favorable for the financial market. The USD/JPY exchange rate reached a low of around 140 on September 18th and has been rising since then, now approaching the level of 150. This helps to explain the recent overall rebound in the cryptocurrency market.
As for interest rate cuts, they can naturally bring more liquidity, but unless the Federal Reserve initiates a large-scale rate cut like during the 2021 pandemic, the short-term effects of rate cuts will not be significant, and rate cuts may even affect the upward trend in the financial market due to the potential impact of narrowing the interest rate differential between the US dollar and the Japanese yen. Therefore, unless there is a large-scale rate cut, investors in the short term do not need to consider rate cuts as too significant.
After the rise in Bitcoin prices, many altcoins also experienced a long-awaited surge. For example, Ethereum, which has been under controversy, recently saw its price rise from around $2,400 to around $2,600. This shows that Ethereum’s fundamentals have not deteriorated to the point of losing market recognition, and it can still experience certain increases when the market trend arrives.
In addition, public chain SUI and Aptos prices have also seen good gains recently. The main narrative behind the hype of these two is “the replacement of Solana.” Although the recent gains of both are considerable, investors need to be aware of potential risks. The narrative of “Solana replacement” itself determines that this is not a track for long-term speculation. On the one hand, Solana itself has not had any major flaws or controversies. On the other hand, Solana’s ecosystem is more mature and cannot be compared with the ecosystems related to SUI and Aptos. According to a market report released by Wintermute, Solana currently dominates token generation, with its market share rising from 60% in early September to 86%, and the weekly token generation increasing from 45,000 to 110,000. This shows that the market has a high degree of recognition for Solana, so whether there is a need to replace Solana is questionable. Therefore, SUI and Aptos may only be suitable for short-term trading, and the value of long-term investment has yet to be demonstrated.
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Founded in 2018, BingX is a leading global cryptocurrency exchange that provides diversified products and services such as spot, derivatives, copy trading, and asset management to over 10 million users worldwide. It also provides analysis tools for mainstream coins such as Bitcoin and Ethereum prices to meet the needs of beginners and professionals. BingX is committed to providing a trusted platform, empowering users with innovative tools and features to enhance their trading capabilities. In 2024, BingX proudly became the main partner of Chelsea Football Club, marking its first spectacular appearance in the sports world.
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