Positioning Crypto and Risk Assets Ahead of Fed Rate Cuts
The article examines how upcoming Fed rate cuts and a liquidity shift can spark a new bull phase for risk assets, particularly crypto. Author Luca applies an emotion-reversal framework, arguing that market makers engineer liquidity traps to shake out weak hands before distributing their holdings at cycle peaks. With CME FedWatch showing a 90% chance of September 2025 rate cuts and macro data pointing to healthy GDP growth and consumer spending, liquidity is poised to return to small-cap stocks and digital assets. In the near term, Bitcoin is expected to test lows around its Nov–Dec 2024 highs, fueling a bearish narrative (“weak September”) that precedes a medium-term rally. Luca is reallocating capital from BTC into high-valuation altcoins, monitoring on-chain adjusted SOPR spikes to time the distribution top. He projects Bitcoin’s cycle high near $190,000 and anticipates altcoin outperformance in the run-up. Traders should watch for liquidity traps, SOPR surges, and narrative-driven pullbacks. While short-term volatility may justify cash reserves and hedges, the mid-term outlook remains bullish. However, this phase likely sets the stage for a larger distribution event and an eventual bear cycle once the final top forms.
Bullish
The article outlines a clear macro and on-chain setup for a medium-term crypto rally driven by Fed rate cuts and returning liquidity. Historical precedents—three past cycles where rate-cut phases boosted risk assets—and a high probability (90%) of September cuts support renewed risk appetite. On-chain indicators like adjusted SOPR have not yet hit full distribution spikes, suggesting room for further gains. The anticipated consolidation near late-2024 highs follows past “liquidity trap” patterns before sharp rallies. While a final distribution top will eventually bring a bear phase, the immediate and mid-term trajectory is bullish for Bitcoin and altcoins. Short-term traders should expect volatility and narrative-driven pullbacks, but the medium-term environment favors upside momentum.