Experts warn that "the time has come"! The Federal Reserve (FED) cutting interest rates may trigger a new round of explosive growth in alts.

In 2025, while the S&P 500 index is reaching an all-time high, the Federal Reserve is preparing to initiate the first rate cut of this cycle. According to the Kobeissi Letter, this unusual macro combination—overvalued stock market, stubborn inflation, and liquidity release—could become a catalyst for driving altcoins into the next explosive rally.

Interest rate cut cycle begins: unprecedented macro background

(Source: Bloomberg)

The market generally expects that the Federal Reserve will cut interest rates by 25 basis points in the interest rate decision on September 17, and continue to maintain an easing policy before the end of the year. Unlike previous interest rate cuts during economic recessions or stock market downturns, this rate cut occurs against the backdrop of the S&P 500 index price-to-book ratio reaching 5.3 times, setting a historical high, even surpassing the peaks before the Great Depression in 1929 and the dot-com bubble in 2000.

Historical data shows that when the stock market is within 2% of its historical high (such as in 2019 and 2024), the S&P 500 often continues its strong pump in the following year, which may also drive funds towards high-growth assets, including cryptocurrencies and alts.

Capital flows into risk assets: alts welcome a golden window

(Source: Trading View)

The interest rate cut will release more Liquidity and prompt investors to seek higher-yielding assets under inflationary pressure. Gold and Bitcoin (BTC) have already performed well in this environment, rising 450% and 105% respectively since 2023.

For altcoins such as Ethereum (ETH), Ripple (XRP), and Chainlink (LINK), especially projects related to artificial intelligence (AI) and decentralized finance (DeFi), such a macro environment may bring stronger capital momentum.

Driving Factors: High Valuation + GDP Growth + Liquidity Release

The Kobeissi Letter points out that the current economic conditions are extremely unique:

· The stock market hits a historic high, with the S&P 500 index price-to-book ratio reaching 5.3 times.

· GDP growth rate reached 3%, indicating economic resilience.

· Inflation rate is 110 basis points above the Federal Reserve's long-term target.

In this context, lowering interest rates means that policymakers are willing to release Liquidity against a backdrop of high valuations and high inflation, which could trigger a new wave of enthusiasm for high-risk assets.

Potential Risks: Discrepancy Between Rate Cut Magnitude and Market Expectations

Despite an optimistic long-term outlook, short-term volatility cannot be ignored. If the Federal Reserve's rate cuts are lower than market expectations, or if cautious signals are released in the policy statement, it may trigger a short-term pullback in stocks and cryptocurrencies.

Therefore, short-term traders need to closely monitor the market reaction after the September FOMC meeting, while long-term holders may find better positioning opportunities amidst volatility.

Conclusion

In the context of an overvalued stock market, steady economic growth, and the upcoming interest rate cut cycle, the altcoin market may be on the threshold of a new round of explosion. For investors optimistic about long-term growth, this could be a rare golden window. However, the policy gaps and market sentiment fluctuations in the short term still require cautious handling. For more real-time quotes and in-depth analysis, please pay attention to the official Gate platform.