Powell’s speech at the Jackson Hole Economic Symposium signals a shift in the Federal Reserve’s policy logic—from focusing primarily on inflation risks to paying greater attention to employment market performance, while hinting that interest rate cuts may have no lower bound. This change aligns with the Trump administration’s pressure for rate reductions.

The Trump administration’s push for rate cuts primarily aims to alleviate short-term government debt pressure and reduce financing costs for small and medium-sized enterprises (SMEs), thereby supporting its “manufacturing” policy. Recent tariff policies have already generated significant fiscal surpluses.

The cryptocurrency market, often seen as the “canary in the coal mine” for risk assets, is highly sensitive to expectations of rate cuts. Following Powell’s speech, cryptocurrencies initially rallied but then corrected, reflecting a shift from emotional expectations to rational anticipation, requiring more data to confirm the extent of rate cuts.

Short-term market trends will hinge on employment data, particularly the non-farm payroll report: weaker-than-expected data could strengthen confidence in a September rate cut, benefiting risk assets; stronger data may trigger further corrections.

ETH’s price trends can serve as a sentiment gauge. As long as it doesn’t break below its current upward channel, investor sentiment remains relatively stable. Policy-driven market conditions resemble the CPI-dominated of 2023.

Abstract:
Recently, the market seems to have entered a perplexing phase. Blue-chip cryptocurrencies are oscillating at high levels without a clear direction, the altcoin market hasn’t seen the anticipated broad bull run, while DAT assets or crypto-equities are stealing the spotlight in traditional financial markets. Prior to this, many voices on social media have attributed this bull run to traditional capital inflows—a view I largely agree with. This capital, compared to previous market cycles, exhibits distinct characteristics: decision-making is heavily influenced by macro factors, risk appetite is lower, capital is more concentrated, wealth spillover effects are weaker, and sector rotation is less pronounced. Thus, as significant changes unfold in the macro environment, re-evaluating these shifts will help us make informed decisions. In summary, I believe that with Powell’s adjustment of the Fed’s decision-making logic, the performance of the U.S. employment market will determine market confidence in a September rate cut in the short term, thereby influencing prices in risk asset markets.

What Powell’s Speech Changed
In recent months, the core macro-economic debate has centered on whether Powell’s Fed would comply with the Trump administration’s wishes to implement substantial rate cuts within the year. So, why is the Trump administration so eager to pressure the Fed into cutting rates, even at the risk of undermining the Fed’s independence and the credibility of the dollar? As analyzed in previous articles, the Trump administration’s economic policy aims to achieve “manufacturing回流” (reshoring of manufacturing), which faces two major obstacles:

1. High internal costs, unable to compete with international rivals;

2. Excessive government debt, lacking sufficient budget to incentivize reshoring.

Over the past six months, the Trump administration’s policies have unfolded in two steps: first, fulfilling campaign promises to solidify authority (e.g., empowering DOGE, shifting crypto policies); second, after consolidating its base, implementing aggressive tariff policies. Tariffs were introduced after securing authority because they raise concerns about imported inflation and internal resistance. With strong authority now established, Trump’s tariff framework has taken shape and yielded results. According to Treasury Secretary Besant, tariffs have generated nearly $100 billion in fiscal surplus as of August 22, with an expected $300 billion by year-end. Additionally, investment pledges from Japan ($550 billion), the EU ($600 billion and a $750 billion energy order), among others, have been secured.

While internal costs (e.g., labor, logistics) cannot be immediately reduced—requiring a market reset akin to a Great Depression—the Trump administration has altered domestic market competition and capital structures via tariffs. Thus, the timing is ripe for the next policy step: Fed rate cuts.

So, what can rate cuts achieve? Two main things:

1. Alleviate debt pressure. The Treasury, under former Secretary Yellen and continued by Besant, increased short-term debt issuance. Short-term rates are influenced by the Fed, reducing long-term debt drag on finances. However, this shortens debt duration and increases near-term repayment pressure, explaining why debt ceiling negotiations have gained traction. Rate cuts would reduce interest pressure from short-term debt.

2. Lower financing costs for SMEs. Unlike large corporations, SMEs rely heavily on bank debt financing. High rates discourage SME expansion. After altering market competition via tariffs, incentivizing SMEs to ramp up production is urgent to fill commodity supply gaps and avoid inflation. Thus, the Trump administration is exerting full pressure on the Fed for rate cuts—this is no smokescreen.

Efforts such as intervening in the Fed’s headquarters renovation and attacking far-left, progressive, hawkish Cook demonstrate this push. These actions似乎 found confirmation in Powell’s speech at Jackson Hole. Notably, Powell, who often defends Fed independence, appeared to yield to Trump’s pressure. Key points from his speech:

1. Risks to the U.S. economy have shifted from inflation to the employment market;

2. Tariffs’ impact on inflation will take time to materialize and are not a driver of spiraling inflation;

3. Updates to the monetary policy framework, including reduced emphasis on the effective lower bound (ELB) as a “normal economic feature.”

In plain terms, the Fed is less worried about tariff-induced inflation and more concerned about employment market collapse due to recession. Rate cuts could be seen as having no lower bound. The ELB refers to the point where further rate cuts cease to stimulate the economy. This shift aligns with Trump’s core policies, creating a “two-way convergence” that fuels expectations of further liquidity easing.

Impact on the Cryptocurrency Market
The cryptocurrency market is often regarded as a barometer for global risk asset sentiment. Thus, following Powell’s speech, cryptocurrencies rallied but then corrected. This indicates that the market had already partially priced in rate cuts for the year. With a new trading logic in place, the market transitioned from emotional to rational expectations, requiring more evidence to assess the extent of rate cuts.

As for the depth of the correction, I believe ETH’s recent trends are worth watching. As long as its price doesn’t break below the current upward channel in the short term, investor sentiment remains intact, and risks are manageable. In the coming week, employment market indicators—especially next Friday’s non-farm payroll data—will significantly impact cryptocurrency trends. Weaker-than-expected data could heighten expectations for a September rate cut, while stronger data may reinforce the resilience of the U.S. job market, easing rate cut pressures and potentially triggering further corrections. Regardless, the recent policy-driven market reminds me of the CPI-dominated of 2023.

Powell’s speech at the Jackson Hole Economic Symposium signals a shift in the Federal Reserve’s policy logic—from focusing primarily on inflation risks to paying greater attention to employment market performance, while hinting that interest rate cuts may have no lower bound. This change aligns with the Trump administration’s pressure for rate reductions.

The Trump administration’s push for rate cuts primarily aims to alleviate short-term government debt pressure and reduce financing costs for small and medium-sized enterprises (SMEs), thereby supporting its “manufacturing” policy. Recent tariff policies have already generated significant fiscal surpluses.

The cryptocurrency market, often seen as the “canary in the coal mine” for risk assets, is highly sensitive to expectations of rate cuts. Following Powell’s speech, cryptocurrencies initially rallied but then corrected, reflecting a shift from emotional expectations to rational anticipation, requiring more data to confirm the extent of rate cuts.

Short-term market trends will hinge on employment data, particularly the non-farm payroll report: weaker-than-expected data could strengthen confidence in a September rate cut, benefiting risk assets; stronger data may trigger further corrections.

ETH’s price trends can serve as a sentiment gauge. As long as it doesn’t break below its current upward channel, investor sentiment remains relatively stable. Policy-driven market conditions resemble the CPI-dominated of 2023.

Abstract:
Recently, the market seems to have entered a perplexing phase. Blue-chip cryptocurrencies are oscillating at high levels without a clear direction, the altcoin market hasn’t seen the anticipated broad bull run, while DAT assets or crypto-equities are stealing the spotlight in traditional financial markets. Prior to this, many voices on social media have attributed this bull run to traditional capital inflows—a view I largely agree with. This capital, compared to previous market cycles, exhibits distinct characteristics: decision-making is heavily influenced by macro factors, risk appetite is lower, capital is more concentrated, wealth spillover effects are weaker, and sector rotation is less pronounced. Thus, as significant changes unfold in the macro environment, re-evaluating these shifts will help us make informed decisions. In summary, I believe that with Powell’s adjustment of the Fed’s decision-making logic, the performance of the U.S. employment market will determine market confidence in a September rate cut in the short term, thereby influencing prices in risk asset markets.

What Powell’s Speech Changed
In recent months, the core macro-economic debate has centered on whether Powell’s Fed would comply with the Trump administration’s wishes to implement substantial rate cuts within the year. So, why is the Trump administration so eager to pressure the Fed into cutting rates, even at the risk of undermining the Fed’s independence and the credibility of the dollar? As analyzed in previous articles, the Trump administration’s economic policy aims to achieve “manufacturing回流” (reshoring of manufacturing), which faces two major obstacles:

1. High internal costs, unable to compete with international rivals;

2. Excessive government debt, lacking sufficient budget to incentivize reshoring.

Over the past six months, the Trump administration’s policies have unfolded in two steps: first, fulfilling campaign promises to solidify authority (e.g., empowering DOGE, shifting crypto policies); second, after consolidating its base, implementing aggressive tariff policies. Tariffs were introduced after securing authority because they raise concerns about imported inflation and internal resistance. With strong authority now established, Trump’s tariff framework has taken shape and yielded results. According to Treasury Secretary Besant, tariffs have generated nearly $100 billion in fiscal surplus as of August 22, with an expected $300 billion by year-end. Additionally, investment pledges from Japan ($550 billion), the EU ($600 billion and a $750 billion energy order), among others, have been secured.

While internal costs (e.g., labor, logistics) cannot be immediately reduced—requiring a market reset akin to a Great Depression—the Trump administration has altered domestic market competition and capital structures via tariffs. Thus, the timing is ripe for the next policy step: Fed rate cuts.

So, what can rate cuts achieve? Two main things:

1. Alleviate debt pressure. The Treasury, under former Secretary Yellen and continued by Besant, increased short-term debt issuance. Short-term rates are influenced by the Fed, reducing long-term debt drag on finances. However, this shortens debt duration and increases near-term repayment pressure, explaining why debt ceiling negotiations have gained traction. Rate cuts would reduce interest pressure from short-term debt.

2. Lower financing costs for SMEs. Unlike large corporations, SMEs rely heavily on bank debt financing. High rates discourage SME expansion. After altering market competition via tariffs, incentivizing SMEs to ramp up production is urgent to fill commodity supply gaps and avoid inflation. Thus, the Trump administration is exerting full pressure on the Fed for rate cuts—this is no smokescreen.

Efforts such as intervening in the Fed’s headquarters renovation and attacking far-left, progressive, hawkish Cook demonstrate this push. These actions似乎 found confirmation in Powell’s speech at Jackson Hole. Notably, Powell, who often defends Fed independence, appeared to yield to Trump’s pressure. Key points from his speech:

1. Risks to the U.S. economy have shifted from inflation to the employment market;

2. Tariffs’ impact on inflation will take time to materialize and are not a driver of spiraling inflation;

3. Updates to the monetary policy framework, including reduced emphasis on the effective lower bound (ELB) as a “normal economic feature.”

In plain terms, the Fed is less worried about tariff-induced inflation and more concerned about employment market collapse due to recession. Rate cuts could be seen as having no lower bound. The ELB refers to the point where further rate cuts cease to stimulate the economy. This shift aligns with Trump’s core policies, creating a “two-way convergence” that fuels expectations of further liquidity easing.

Impact on the Cryptocurrency Market
The cryptocurrency market is often regarded as a barometer for global risk asset sentiment. Thus, following Powell’s speech, cryptocurrencies rallied but then corrected. This indicates that the market had already partially priced in rate cuts for the year. With a new trading logic in place, the market transitioned from emotional to rational expectations, requiring more evidence to assess the extent of rate cuts.

As for the depth of the correction, I believe ETH’s recent trends are worth watching. As long as its price doesn’t break below the current upward channel in the short term, investor sentiment remains intact, and risks are manageable. In the coming week, employment market indicators—especially next Friday’s non-farm payroll data—will significantly impact cryptocurrency trends. Weaker-than-expected data could heighten expectations for a September rate cut, while stronger data may reinforce the resilience of the U.S. job market, easing rate cut pressures and potentially triggering further corrections. Regardless, the recent policy-driven market reminds me of the CPI-dominated of 2023.