A new round of interest rate cuts has shown signs, and the crypto market welcomes multiple Favourable Information.

The Trend of Global Monetary Policy Easing Begins to Appear

At the beginning of this month, the Federal Reserve maintained the target range for the federal funds rate at 5.25% to 5.50% and announced that it would slow the pace of balance sheet reduction starting in June. The meeting's content still revolved around "high inflation and a wait-and-see approach to interest rate cuts," which is in line with market expectations. Currently, the market estimates that the probability of an interest rate cut in September is close to 50%, and an interest rate cut before the end of the year is almost certain.

At the end of the month, the Federal Reserve Board members further elaborated on the specific conditions for future interest rate cuts. They stated that, with the employment market remaining strong, good inflation data for another 3-5 months would be needed before considering a rate cut by the end of the year.

This viewpoint is reasonable. The US April CPI data met expectations, rising by 3.4%. Although there are fluctuations in the employment market, the number of initial unemployment claims remains at a historical low, showing resilience. The preliminary values for May's manufacturing and services PMI both exceeded expectations, indicating economic vitality. Therefore, the Federal Reserve indeed needs to continue monitoring the situation.

However, some signs indicate that a rate cut cycle is about to arrive. Regulatory agencies such as the Federal Reserve are formulating new plans to relax previous requirements for large banks to increase their capital, which is seen as one of the important signals for a rate cut.

Globally, the interest rate reduction cycle has already begun. According to a report from a securities company, more than ten major central banks have started to lower interest rates. It is expected that in the coming months, the European Central Bank, Swiss National Bank, and others will follow suit. Against this backdrop, a rate cut in the United States is an inevitable trend.

Tech giants continue to innovate at new highs, interest rate cuts may change the US stock market landscape

A certain chip giant's latest financial report exceeded market expectations: revenue increased by 262% year-on-year to $26 billion, and net profit grew by 620% year-on-year to $14.88 billion, with earnings per share of $6.12. The company's market value once exceeded $2.6 trillion, making it the third largest company by market value in the U.S. stock market.

It is worth noting that on the same day, the stock prices of other tech giants generally fell, leading to the teasing that "the US stock market relies entirely on a certain chip company for support." In fact, the recent increase in the US stock market is mainly due to the AI-related sectors; excluding the AI sector, the gains of other individual stocks are limited.

In the long term, several tech giants closely related to AI have almost supported the entire US stock market. If these companies are excluded, the returns on the US stock market are not high, while the increases in other global markets are close to zero.

This situation is not a long-term solution; the bursting of the AI bubble could trigger a significant market decline. However, the upcoming rate cut cycle may alleviate this risk. During the rate hike cycle, the market tends to concentrate on the most certain sectors, creating an extreme AI market. The arrival of the rate cut cycle will enhance market liquidity and risk appetite, and the long-dormant non-AI sectors may see a turnaround, potentially changing the investment style in the US stock market.

Favourable Information frequently reported in the crypto market, Ethereum spot ETF is imminent.

After a dull April, the crypto market welcomes a new round of activity this month: Bitcoin has returned above $71,000, and Ethereum surged over 20% on May 21, subsequently approaching $4,000.

The current rebound is mainly due to the favourable information regarding the Ethereum ETF that has emerged from the United States. Although the market officially reacted around May 24, there was a violent rebound on the 21st, followed by a period of consolidation, indicating that the market is optimistic about this favourable information in the long term.

On May 24, the regulatory agency officially approved the 19b-4 filing regarding the Ethereum ETF, which outlines the rules for trading on the exchange. Although the S-1 filing (IPO registration statement) has not yet been approved, the establishment of the rules indicates that the listing of the Ethereum spot ETF is a done deal.

At the same time, the FIT21 bill was passed by the House of Representatives, which clarifies the definition of digital assets and the regulatory framework, paving the way for more crypto assets to apply for spot ETFs and compliance.

For a long time, regulatory agencies have had a vague and exclusionary attitude towards the encryption industry, but now they have surprisingly approved the Ethereum spot ETF in a way that exceeds expectations. This sudden shift may not be coincidental, as it could reflect the tendency of both political parties in the United States to use crypto assets as a bargaining chip in political games.

Recently, the U.S. Senate passed a proposal to repeal the SAB 121 bill, which requires companies holding encryption to maintain corresponding cash. Although the President has indicated that he will veto it, overturning SAB 121 may just be a matter of time. This move sends an important signal: some Democratic lawmakers are starting to break with traditional positions, opposing excessive intervention, which could mark a significant shift in the party's crypto market policy.

On the other hand, a presidential candidate shouted the slogan "Ensure that the future of encryption occurs in the United States," attempting to attract the votes of crypto asset holders with high-profile rhetoric.

Overall, in May, favourable information in the crypto market emerged frequently, and it is being accepted by the traditional world at an unexpected pace, adding momentum to the bull market.

Outlook

Global monetary policy is moving towards a loose direction. Although the Federal Reserve remains cautious about interest rate cuts, actions from other major central banks and the Fed's relaxation of bank capital requirements suggest a trend of monetary easing worldwide. Investors should closely watch these signals and consider looking for opportunities in the bond market and interest rate-sensitive assets.

The technology sector continues to perform strongly. A major chip company's earnings report exceeded expectations, and the three major U.S. stock indices continue to reach new highs, highlighting the growth potential of tech stocks. It is recommended to continue paying attention to the innovative leaders in the technology sector and assess their long-term development prospects.

The shift in attitude of regulatory agencies and the advancement of relevant legislation indicate that the encryption industry is gradually moving towards compliance. This not only brings positive developments to the crypto market but also provides new investment opportunities for investors.