When we hear the news of the Fed dropping interest rates, many investors immediately associate it with the arrival of a bull run. This intuition is not unfounded. Imagine that when the cost of capital suddenly drops, the attractiveness of bank deposits significantly decreases, idle funds will naturally seek more productive places.

In the economic landscape of the United States, the manufacturing industry and real estate market struggle to fully absorb this capital, making the capital market the most ideal carrier. This has led to the vigorous development of the U.S. stock market, attracting a large influx of funds.

It is worth noting that there is a close connection between the US stock market and the cryptocurrency market. The prosperity of the stock market often drives investors' risk appetite, which in turn stimulates the activity of the cryptocurrency market. This chain reaction further amplifies the effect of abundant liquidity into the crypto space.

However, some may wonder: why can the US stock market maintain an upward momentum during a rate hike cycle? This seemingly contradictory phenomenon actually stems from the unique fiscal policy of the United States. On one hand, rate hikes attract global dollars to flow back; on the other hand, the Treasury issues a large amount of government bonds, which effectively increases the supply of money in the market. This seemingly tightening but actually loosening policy explains why the US stock market can still hit new highs in a rate hike environment.

If the Fed starts to drop interest rates, this effect will become even more pronounced. The further drop in the cost of funds will stimulate investment enthusiasm, which may drive up multiple markets such as stocks, gold, commodities, and cryptocurrencies.

Overall, a drop in interest rates is like opening the floodgates of the financial market, with a large amount of capital pouring into various investment areas, driving up asset prices. However, investors should also be vigilant about the risks and bubbles that excessive liquidity may bring. In such an economic environment, rational analysis and prudent decision-making become particularly important.