Fed rate cut expectations rise: The bond market and Bitcoin are bullish together, and risk assets are warming up across the board.

Against the backdrop of widespread market expectations that the Fed will cut interest rates this week after ending a nine-month pause, bond investors are actively buying bonds with maturities of up to ten years, betting that the yield curve will steepen. Meanwhile, Bitcoin's on-chain indicators are also showing positive signals, indicating that investors are simultaneously pouring into risk assets amid changes in the macroeconomic environment.

Bond investors are positioning themselves ahead of a Fed rate cut.

According to Reuters, due to the latest data showing a weakening labor market and moderate inflation, the market generally expects the Fed to lower the benchmark overnight rate by 25 basis points to a range of 4.00%-4.25% at the end of its two-day meeting.

Before the announcement of interest rate decisions, fixed income investors are increasing the duration of their portfolios in order to profit from lower interest rates. Duration (measured in years) indicates the extent to which bond prices may rise or fall with changes in interest rates. Generally, when interest rates decline, the value increase of high duration bonds will be greater than that of low duration bonds.

Kathryn Kaminski, Chief Research Strategist and Portfolio Manager at AlphaSimplex Group, stated: "The overall trend in the market is leaning towards buying bonds, and in this scenario where interest rates may decline, they are bullish on bonds." She added: "They are trying to get ahead of the Fed to prepare for potential rate cuts."

Vishal Khanduja, head of the broad market fixed income team at Morgan Stanley Investment Management, stated that over the past six weeks, he has increased the duration of the portfolio in the 5-10 year bond space.

At the same time, money market funds in the short-term fixed income market have also extended their durations. Teresa Ho, Managing Director at J.P. Morgan, wrote in a research report that the weighted average maturity (WAM) of government money market funds has increased by 3.4 days over the past month, reaching an average of 40 days.

Bitcoin on-chain data: Bull market signals continue to emerge

In line with the optimism in traditional financial markets, Bitcoin's on-chain data also paints a positive picture.

NVT Golden Cross Indicator: The NVT Golden Cross for Bitcoin is in the neutral zone at 0.3, indicating that there is neither extreme overheating nor severe undervaluation, creating conditions for a healthy rise. The indicator operating in the neutral zone suggests that Bitcoin still has room for growth without the risk of speculative excess, which is consistent with historical rebounds.

Cash Distribution Days (CDD) Rising: The cash distribution days for Bitcoin have increased by nearly 6%, reflecting that long-inactive old coins are being reactivated. This metric measures the activity of long-term holders rather than short-term traders. While the reactivation of old coins typically signals profit-taking, the current scale is still moderate, indicating that the market is undergoing reconfiguration rather than a large-scale sell-off.

(Source: CryptoQuant)

Miner sentiment remains restrained: The Miner Position Index (MPI) surged nearly 150% in 24 hours, but the ratio still sits at a low of 0.10. This indicates that miners are not actively selling Bitcoin to exchanges, but are maintaining restraint. This restrained attitude provides stability on the supply side and confirms that the price of Bitcoin is expected to rise further.

Risks and Outlook: Market Momentum and Potential Challenges

Bond investors continue to intensify their steepening trades, buying 5-year government bonds while selling 30-year government bonds. This reflects the market's bet on a decline in short-term rates, while concerns about long-term inflation driven by the high fiscal deficit in the U.S. remain. Jeffrey Klingelhofer, Managing Director at Aristotle Pacific Capital, stated that in the context of persistently high inflation, the yield curve may steepen due to inflation concerns rather than a decrease in interest rates.

The Fed will also release its latest quarterly economic forecast this Wednesday, including the highly anticipated "dot plot." Analysts say that this year's median forecast may indicate two more rate cuts.

In summary, the neutral NVT golden cross of Bitcoin, the rising CDD, and the restrained behavior of miners collectively indicate a market that still has room for growth. As old coin holders cautiously transfer tokens and miners do not engage in large-scale selling, the momentum for Bitcoin to advance towards $150,000 remains intact. The synchronized bullishness of these two markets forms the macro backdrop for the current recovery of risk assets.

Conclusion

The two major markets globally—the bond market and the cryptocurrency market—share a synchronized positive expectation regarding the Fed's future policy path, collectively signaling a broad bull market for risk assets. From duration bets in bonds to on-chain data of Bitcoin, investors are actively positioning themselves to profit from a potential rate cut cycle. However, as market analysts have pointed out, the potential inflation risks and the ultimate trajectory of the Fed's "dot plot" remain key factors to watch closely in the future.