Gulsby’s warning to "take away the wine bowl" is no joking matter! The dovish faction's reversal reveals the truth about the Federal Reserve's easing
The crypto market just celebrated the rate cut for December for two days, and Gulsby’s call to "take away the wine bowl" doused the market with cold water—this former dovish heavyweight not only voted against the rate cut but also stated that easing should be withdrawn when the economy overheats. This operation hides signals that the crypto market should be most wary of.
Don’t think this is just “hawkish rhetoric”; Gulsby’s reversal has been foreshadowed. The trend of falling inflation has already stagnated, with the core PCE still at 2.8% in September. Businesses and consumers are still viewing prices as a major concern, and key data like November's non-farm payrolls have yet to be released. In this context, rushing to cut interest rates is essentially betting that inflation will cool off on its own. More importantly, he pointed out the core logic: to combat inflation, the Federal Reserve should take away the wine bowl when the party is at its peak, rather than waiting for the bubble to burst before remedying the situation.
The impact on the crypto sphere is far more direct than one might imagine. Cryptocurrencies are liquidity-sensitive assets, and the narrative of the “easing cycle starting” that the market previously fervently speculated on has crumbled in the face of the internal division within the Federal Reserve—this week, three officials have already opposed a rate cut, and Gulsby’s statement further confirms that easing will not be smooth sailing. It’s worth noting that after the rate cut in October, altcoins surged due to liquidity injection, but now the warning of “taking away the wine bowl” suggests that future liquidity may not meet expectations, with highly leveraged altcoins being the first to bear the brunt.
The key variables ahead are the delayed inflation and employment data releases. If the data shows that inflation remains resilient, Gulsby’s “take away the wine bowl” theory may gain more support, and expectations for rate cuts next year will further cool, potentially leading to a valuation adjustment for Bitcoin and Ethereum; if the data cools down, the market may temporarily digest hawkish pressure, but long-term expectations for easing have already been questioned.
It is advisable to currently reduce leverage positions, focus on the core data outcomes and adjustments in the Federal Reserve's dot plot, and not be swayed by short-term market movements. The crypto market has always been about “liquidity determining life and death,” and Gulsby’s dovish reversal serves as a reminder to everyone: amid the celebration, don't forget that the Federal Reserve could take away the wine bowl at any time.
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