The market's reaction this time has been quite calm, even overly calm. Powell has been in office for eight years and will step down next May; almost everyone thinks that Trump's economic advisor Kevin Hassett will take that position. This should be a big deal, right? A change in chairmanship could mean a shift in policy. But strangely, the market's monetary votes tell us: don't expect any earth-shattering changes.
According to data from the interest rate futures market, traders generally believe that by the end of next year, the Federal Reserve may only lower interest rates by a maximum of 75 basis points. What does 75 basis points mean? It means three standard rate cuts of 25 basis points each. Moreover, it is very likely that two of these cuts will occur in the first half of 2026 when Powell is still in office, and by the time Hassett really takes office, there may only be one more cut in the second half of 2026. This expectation is much more restrained than many people imagine regarding Trump’s appointee causing a flood of liquidity.
Based on various analyses, by the time the Federal Reserve Chairman hands over the position, the expected inflation rate may still be hovering around 3%. Meanwhile, after potential rate cuts, the real interest rate may already be close to zero. This means that by then, the monetary policy environment itself will already be quite loose, and the new Chairman Hassett does not need to turn the faucet too much. He is not taking office in an urgent firefighting environment but rather considering whether to add a little more to a pool that has already been filled with a lot of water.
The dream of a bull market in the crypto space can be put on hold. If the market's expectation of rate cuts is this low, then the script of the Federal Reserve opening the floodgates and massive liquidity pouring in to boost all risk assets is unlikely to play out in the short term. This cold water first extinguishes the excessively optimistic liquidity fantasies.
The market will pay more attention to why interest rates are being cut. If the rate cut is due to inflation being truly subdued and the economy achieving a soft landing, that would be good for risk assets. However, if the rate cut is forced by a weak economy, it may be accompanied by declining corporate profits and insufficient consumer confidence, which would not be purely beneficial for the stock market or the crypto market. In the future, we need to separate the reasons for the Federal Reserve's rate cuts from the act of cutting rates itself.
Volatility may intensify. From Powell to Hassett, there will surely be changes in leadership style and communication methods. The market needs to adapt to the new Chairman's temperament; any statements that deviate from expectations may cause fluctuations. For Bitcoin and the entire crypto market, the uncertainty from the traditional macro level has increased, and volatility may become larger during this period.
The narrative focus may shift. When the grand external narrative of the Federal Reserve's easing weakens, the market's attention may return more to the assets themselves and the internal industry dynamics. For example, the capital flow of Bitcoin spot ETFs, the ecological development of Ethereum, the competitive landscape of mainstream Layer 1s, and those crypto applications that can truly generate revenue and users. Fundamentals and real adoption will become more important than ever.
Overall, this message reinforces a judgment: the era of cheap money may really be over. The future market will test the true quality of assets and the survival capabilities of projects. Regarding Hassett's succession, the market currently offers a moderate easing and limited stimulus expectation. This reminds us that in the crypto space, we cannot always fully rely on the central bank's faucet.
But does the market really understand this moderate easing and limited stimulus expectation? On the other side of mainstream consensus, I am monitoring two key indicators that are sending conflicting signals. Tonight's strategy sharing will reveal the potential variables overlooked by the market and the corresponding layout direction.
