The market always erupts amidst doubts, and this time, the liquidity faucet may open earlier than expected.
As an old hand who has experienced multiple bull and bear markets, I have recently been staying up late watching the probability changes for the Fed chair candidates, as if returning to the eve of the massive monetary easing after the pandemic in 2020. Many crypto friends missed the epic rally of Bitcoin from a few thousand to sixty thousand dollars due to hesitation, and today, we might once again stand at a similar historical juncture.
The latest dramatic reversal is: the originally leading 'dovish' Hassett has been surpassed by the 'reformist' Waller, with predicted winning probabilities soaring from single digits to over 45%. Trump's attitude has warmed after meeting with Waller, while Hassett's premature emphasis on policy independence may have caused dissatisfaction for Trump.
01 The Game for the Federal Reserve Chair: A Power Game that Affects Market Direction
The competition for the Federal Reserve chairmanship is not just a routine personnel change, but a key battle that will determine the direction of global liquidity for the next few years. The current chairman Powell will end his term in May 2026, and Trump has clearly expressed a desire to nominate a successor who will more decisively push for rate cuts.
The market originally generally viewed Kevin Haslett, director of the White House National Economic Council, as the top contender. As a close confidant of Trump, he has indicated that if he becomes the chairman of the Federal Reserve, he would 'immediately cut interest rates' and holds Coinbase stocks valued between $1 million and $5 million, which is extremely rare among Federal Reserve officials.
But the political winds are changing rapidly. On the prediction market Polymarket, Walsh's support rate has exceeded 45%, officially surpassing Haslett. This 'Double Kevin' contest is not only about personal fate but also conveys a clear signal: the next chairman of the Federal Reserve will undoubtedly be deeply influenced by Trump's will.
Who is Walsh? He has an impressive resume: a PhD in economics from Stanford and a law degree from Harvard, previously serving as a Federal Reserve governor, and was Bernanke's right-hand man during the financial crisis in 2008. More importantly, his father-in-law is a longtime friend and financier of Trump (an heir to Estée Lauder), belonging to Trump's 'inner circle'.
02 Policy Positions of Two Candidates: Easing or Tightening?
Walsh's policy proposals differ from traditional doves or hawks. He has long criticized the Federal Reserve's 'massive easing', advocating for aggressive balance sheet reduction to suppress inflation and returning to the core mission of 'price stability'.
But this does not mean he will maintain high interest rates. Walsh supports interest rate cuts but emphasizes the need to combine them with balance sheet reform. He has shifted from being an 'inflation hawk' to supporting rate cuts, but stated he would act decisively when inflation rebounds; this balanced attitude is what the market hopes to see.
Haslett is an undeniable dove. He has publicly criticized the current high interest rates multiple times, advocating for deeper and faster rate cuts, even supporting a significant cut of 50 basis points in December. He believes interest rates should drop to 'well below 3%'.
The market has already priced in these two possible outcomes: if Haslett comes to power, there may be short-term liquidity easing and market euphoria. If Walsh takes office, there may be short-term liquidity tightening pressure, but he supports deregulation, is optimistic about AI productivity, and has previously invested in cryptocurrencies, which may drive healthier growth in financial markets in the long term.
03 Market Impact: Potential Opportunities and Risks for Cryptocurrencies
The Federal Reserve's policy shift cannot be underestimated in its impact on cryptocurrencies. Looking back to 2020, the Federal Reserve's massive easing directly catalyzed Bitcoin's epic rise from a few thousand dollars to sixty thousand dollars. History does not repeat itself simply, but it often rhymes.
The market has already begun to anticipate rate cuts. CME's 'FedWatch' shows that the probability of a 25 basis point cut in December has risen to 89.2%. The cumulative probability of a 50 basis point cut by January next year is 25.7%. Under this expectation, Bitcoin has risen over 13% from its low on November 21 (80,843 USD).
On the Ethereum side, the Fusaka upgrade on December 4 is worth noting. This upgrade will increase the number of Blobs from 9 to 15, directly reducing Layer 2 transaction fees by 30%-50%, and for the first time granting 'account abstraction' capabilities to EOA accounts. The technical upgrades combined with liquidity expectations could create a double-click effect.
But crypto enthusiasts need to be wary of short-term risks. Nobel laureate Paul Krugman warns that Trump's declining poll numbers may negatively impact Bitcoin prices. If the 'Trump trade' collapses, it could temporarily suppress market sentiment.
04 Strategies for Retail Investors: How to Position Amid Uncertainty?
In light of this macro environment, my personal strategy is:
Hold on to Bitcoin and Ethereum spot before being thrown off the train before it takes off. During market volatility, consider positioning in batches at lower prices, rather than waiting for everyone to react before chasing higher prices. Stay patient, avoid distractions, as policy expectations often lead the market.
In terms of specific operations, I am focusing on the movements of U.S. Treasury yields and the U.S. dollar index, as these two indicators typically change first before the interest rate decision is announced. At the same time, position management is particularly important; before major events are announced, I maintain a position of ≤30% to prevent losses from unexpected volatility.
For medium to long-term investors, the current pullback may be a stage of accumulation. The logarithmic growth curve of BTC points to 140,000-200,000 USD, with the peak of the cycle possibly appearing in October-November. The year-end target for ETH is 5,000-10,000 USD, with pullbacks presenting strategic positioning opportunities.
In the coming weeks, as the choice of the Federal Reserve chairman becomes clearer, market volatility may increase. But no matter who ultimately takes the helm of the Federal Reserve, the direction of monetary policy towards easing has already been established. Smart money is quietly positioning itself, while those hesitating may miss another valuable opportunity to get on board.
Bull markets always unfold amidst hesitation and end in frenzy. Now, we may be standing at the starting point of a new round of liquidity. The wealth train is sounding its horn; will you keep up or watch it fade away?
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