**What’s the Deal with Rate Cuts? Why Do They Make Risk Assets Rally?**

Simply put, a rate cut means the Federal Reserve lowers the federal funds rate. Right now, the target range is 4.50%-4.75%. Typically, each cut is 25 basis points (that’s 0.25%), but in emergencies, they might slash by 50 or even 75 basis points.

But the key isn’t the number itself—it’s the chain reaction it triggers. Here’s the transmission path broken down into five steps:

Borrowing costs go down → Companies feel confident to expand, regular people are willing to take out loans for homes and cars → Banks become more eager to lend, the money multiplier increases, M2 growth starts to rebound → Stock market valuations get pushed up (because the discount rate drops) → US stocks rise, global markets follow → Money flows out of safe havens like US Treasuries and starts chasing high-risk, high-reward assets like tech stocks, crypto, and gold → The dollar weakens, so dollar-denominated assets like Bitcoin naturally see price increases.

**In a nutshell:** Rate cuts = more liquidity + increased market risk appetite = risk asset party mode activated.

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**The 2025 Rate Cut Cycle Is Different from Before**

The backdrop this time is a bit unusual.

(The original text mentioned a special backdrop but was cut off—suggest adding specifics such as: inflation has fallen but remains above target, the labor market remains resilient, geopolitical risks, etc.)

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**What Does History Tell Us: How Do Assets Perform After Rate Cuts?**

Looking back at previous rate cut cycles, you’ll notice some hard and fast rules.

(The original text mentioned historical patterns but was cut off—suggest supplementing with specific data, e.g.: within 6 months of a rate cut cycle starting, the S&P 500’s average gain is X%, Bitcoin’s performance is Y%, etc.)

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**December 11 Meeting: What Is the Market Watching?**

As of December 7, the latest expectations (data from CME FedWatch):

- Probability of a 25bp cut: **85%**
- Probability of a 50bp cut: 14%
- Probability of no change: 1%

On the dot plot side, most expect the median rate by the end of 2026 to be revised down to the 3.25%-3.5% range—which means there’s still 100 to 125 basis points of rate cuts left in the pipeline.

Powell will very likely stick to the standard script: “We’re moving from a restrictive to a neutral stance, everything depends on the data, and no path is pre-committed.”

How will the market interpret it? That’ll depend on the post-meeting press Q&A. If Powell sends a more dovish signal, the crypto market could ignite right away. On the flip side, if he emphasizes that inflation risks remain and rate cuts need to go slow, the market may need to digest that in the short term.