Recently, remarks from James Bullard, a popular candidate for Federal Reserve Chairman and former President of the St. Louis Fed, have stirred discussions in the financial circle. He clearly stated that the tariffs implemented by the Trump administration did not lead to inflation, and he predicts that the Federal Reserve will start cutting rates in September, possibly accumulating 100 basis points in cuts over the next year. This viewpoint aligns with Trump's push for rate cuts and brings new imagination to the crypto market.

The 'Rashomon' of tariffs and inflation: Why do the data not support pessimistic expectations?

Bullard pointed out that although the market was once worried that tariffs would raise prices, actual data shows that the impact of tariffs on inflation is 'very weak.' He used the July U.S. CPI data as an example, where year-on-year growth of 2.7% slightly exceeded the Fed's 2% target, but the core inflation indicator did not show the expected acceleration. This conclusion resonates with the views of the Chair of the White House Council of Economic Advisers, who bluntly stated, 'There is no evidence to date that tariffs have caused inflation.'

Analysis suggests that the reason tariffs have not led to inflation may be:

  1. Enhanced supply chain resilience: Global companies are accelerating the restructuring of supply chains under tariff pressure, with some costs absorbed internally rather than passed on to consumers;

  2. Consumption suppression effect: The high tariffs imposed by the U.S. on imported goods have raised prices, but consumers are reducing unnecessary spending due to inflation expectations, forming a hedge;

  3. Policy goal differences: Trump's 'reciprocal tariffs' focus more on trade balance rather than solely increasing consumer costs, and in practice, some tariffs are borne by companies themselves.

Is the interest rate cut cycle about to restart: Can the crypto market see a rebound?

Brad predicts that the Federal Reserve will begin cutting interest rates in September, and rates may approach neutral levels in the next 12 months. If this expectation comes true, it will have a dual impact on the crypto market:

  • Liquidity easing is favorable: A low interest rate environment typically reduces the attractiveness of holding cash, driving funds towards risk assets like Bitcoin. Historical data shows that after the Fed cut rates by 25 basis points in December 2024, Bitcoin briefly surpassed $100,000, although it later corrected due to cautious policy expectations; the long-term trend remains supported by liquidity.

  • Balancing act of inflation expectations: Although tariffs did not trigger inflation, rising global supply chain costs may indirectly push up production costs. If the Federal Reserve chooses to cut rates due to economic weakness, it needs to be wary of the rebound in inflation expectations disrupting policy timing.

It is worth noting that despite increased market volatility, the trend of companies purchasing Bitcoin continues. For example:

  • Thumzup Media announced it will convert 90% of its liquid assets into Bitcoin and plans to use it to pay contractor fees;

  • KULR Technology Group increased its Bitcoin holdings to $42 million, becoming another public company that follows MicroStrategy's example.

Analysis suggests that the enthusiasm for companies 'stockpiling coins' is based on recognition of Bitcoin's long-term value. On one hand, Bitcoin’s safe-haven property as 'digital gold' is highlighted under inflation expectations; on the other hand, the Trump administration's friendly stance towards the crypto market has also boosted institutional confidence.

Chinese crypto perspective: Rate cut dividends and regulatory balance

For Chinese users, the impact of the Federal Reserve's policy direction is mainly reflected in two aspects:

  1. Changes in fund flows: If the dollar weakens due to rate cuts, it may attract foreign investment into emerging markets, indirectly benefiting Hong Kong's tech stocks and crypto-related assets allocated through Hong Kong stock connect;

  2. Local policy linkage: China's regulation of the crypto market remains strict, but the Fed's rate cuts may stabilize the RMB exchange rate, allowing more room for domestic monetary policy easing and indirectly improving market sentiment.

Conclusion: Opportunities and challenges coexist, and long-term value remains core.

Bullard's remarks have injected a dose of 'steroids' into the crypto market, but short-term volatility remains unavoidable. Investors need to pay attention to two major variables:

  • The actual pace of Fed rate cuts: If the rate cut is less than expected, it may trigger a market correction;

  • The cost of global supply chain restructuring: Whether the increase in corporate costs due to tariffs is ultimately passed on to consumers still needs observation.

As Brad said: 'Success requires preparation, not prediction of failure.' For the crypto market, long-term value still depends on technological innovation and institutional adoption, rather than a single policy change. In the intertwining of rate cut expectations and tariff impacts, maintaining rationality and focusing on fundamentals may be key to navigating cycles.

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