Last night, US stocks plummeted, with the Nasdaq index dropping by 3.07%, the S&P 500 index dropping by 2.24%, and the Dow Jones index dropping by 1.73%, resulting in a loss of over $1 trillion in market value overnight.

The main culprit for this sharp drop is indeed the latest speech by Federal Reserve Chairman Powell.

The market was initially waiting for him to release some 'dovish' good news, but he instead threw out a bunch of 'hawkish' signals, completely shattering everyone’s hopes for an interest rate cut.

So what exactly did Powell say? Why did the market react so fearfully? How will things unfold in the future? Let's break it down today.

Why did Powell's speech scare the market?

The core message of Powell's speech is simple: don't expect the Federal Reserve to save the market; if the market is chaotic, blame Trump!


He first complained about Trump’s policies changing daily, creating a state of panic in the market, and warned everyone not to dream that the Federal Reserve would inject liquidity to save the market just because stocks fell.

He also emphasized that the Federal Reserve will maintain its independence, regardless of how chaotic the political situation becomes, the policy will not be led by others.

What's harsher is that he directly stated there would be no interest rate cuts in the short term, and balance sheet reduction would continue, leading to tight market liquidity.

This is telling everyone: thinking you can rely on the Federal Reserve to inject liquidity to save the market? Think again.

So, is the US economy really going to 'cool down'?

Powell's attitude towards the economic situation seems to be both comforting and cautious.

He acknowledged that Trump’s tariff policy might raise inflation, slow down economic growth, and even potentially lead to 'stagflation', where prices soar but the economy stagnates.

However, he quickly added: we are not yet at the point of recession; the latest GDP forecast is -2.2%, so everyone should not panic.

But he also mentioned that supply chain issues might make inflation more 'stubborn', and the Federal Reserve needs to keep a close eye on inflation.

This sounds like he's trying to reassure everyone, but it always feels like he's leaving a way out for worse scenarios.

So why is the market so panicked?

Investors were initially full of expectations, thinking that even if Powell did not lower interest rates, he would at least say something nice to soothe market sentiment.

Not only did he not mention interest rate cuts, but he also downplayed the risks of a downturn in the US economy, continued balance sheet reduction, and put on a 'calm while fishing' posture.

What worries the market even more is that he has put the tariff issue on the table, implying that inflation might become more challenging to handle due to tariffs.

The market fears uncertainty the most; Powell's words essentially mean: I'm just watching the show, you all panic first!

Consequently, US stocks, bonds, and other risk assets plummeted, leaving investors dumbfounded.

What unexpected surprises does the crypto market have?

Just when the market was in despair, Powell surprisingly delivered a 'small surprise' for the cryptocurrency industry.

He mentioned that stablecoin legislation is a current priority, and regulation may be appropriately loosened. This is good news for the crypto market.

In simple terms, cryptocurrencies are slowly being 'normalized', and there may be more opportunities in the future.

As a result, US stocks fell sharply, while the cryptocurrency sector might still have some hope, which could be one reason for Bitcoin's resilience.


What will the Federal Reserve do next?

Powell's strategy is now very clear: adapt to changes by maintaining the current stance, and first observe how Trump’s policies are implemented.

He specifically mentioned that after the April tariff policy is officially implemented, the next steps will be determined based on inflation and economic data.

If tariffs only raise inflation by 10% and the economy only slows slightly, interest rate cuts may happen in the second or third quarter.

However, if inflation goes completely out of control or the economy truly collapses, Powell will transform into a 'savior', not only cutting interest rates but also potentially restarting large-scale asset purchases, that is, expanding the balance sheet.

Therefore, April is a key time point; data will determine whether the Federal Reserve continues to be 'hardline' or 'softens'.

How should we respond?

In the short term, market sentiment will be relatively low, and risk assets such as US stocks, cryptocurrencies, and bonds will continue to be under pressure.

For friends looking to buy the dip, take it easy first, don't rush to go all in, and keep some bullets to deal with extreme situations.

In the long run, the regulatory framework for cryptocurrencies is becoming clearer, which could bring new opportunities to the crypto sector.

As for the Federal Reserve, Powell is currently playing a game of 'Landlord'; he holds the cards, but it depends on how Trump plays.

What we can do is to pay more attention to the news about the April tariff implementation, keep an eye on inflation and economic data, and not get thrown off by the market's rollercoaster.