At 10 PM Beijing time tonight, Fed Chairman Powell's speech will become the focus of global financial markets. For the cryptocurrency field, this speech is not only about liquidity expectations in traditional markets, but it may also have far-reaching impacts on the cryptocurrency sector through interest rate paths, regulatory signals, and macroeconomic assessments. The following analyzes the three possible scenarios and response strategies in conjunction with the relationship between Federal Reserve policy and the cryptocurrency market.
I. The Relationship between Federal Reserve Policy and the Cryptocurrency Market: Interest Rates are a Core Variable
Interest Rate Transmission Mechanism
Rate Cut Cycle: Lower borrowing costs, release market liquidity, and push funds toward high-risk assets. Historical cases show that after the Fed cut rates to zero in 2020, Bitcoin's price soared by 1,000% within 18 months.
Rate Hike Cycle: Increase funding costs, suppress speculative demand. The Fed's aggressive rate hikes in 2022 led to a 65% drop in Bitcoin's price, and the total market capitalization of the cryptocurrency market shrank below $800 billion.
Stablecoin Volatility: During a rate hike cycle, a stronger dollar may weaken the appeal of stablecoins (like USDT). In August 2025, USDT experienced a rare decoupling due to expectations of Fed rate hikes, with its price dropping to $0.98, triggering panic in the market.
Regulatory and Policy Signals
The Federal Reserve's regulatory stance towards cryptocurrencies directly affects market confidence. For example, in 2025, the Trump administration released positive signals promoting the development of the stablecoin market, while strict regulatory policies may suppress market activity.
II. Three Scenarios from Powell's Speech and Their Impact on the Cryptocurrency Sector
Scenario 1: Stance More Hawkish than Expected (Diminished Expectations for Rate Cuts)
Market Response:
Bitcoin/Cryptocurrency: May face selling pressure, price decline. If Powell suggests that the probability of a rate cut in September is lower than the current 75% (such as keeping the interest rate unchanged), Bitcoin may break below the support level of $60,000.
Stablecoins: Demand for stablecoins like USDT is declining, and the risk of decoupling is increasing. The USDT decoupling event in August 2025 shows that the market is extremely sensitive to tightening liquidity.
Institutional Investors: Reduce cryptocurrency allocation, shift towards traditional bonds or dollar assets.
Response Strategy:
Short-term: Avoid high-leverage contracts, focus on the key support level of $60,000.
Long-term: Layout anti-inflation assets (such as gold-linked cryptocurrencies) to hedge against the risk of a strong dollar.
Scenario 2: Stance More Moderate than Expected (Heightened Expectations for Rate Cuts)
Market Response:
Bitcoin/Cryptocurrency: If a 25 basis points rate cut is confirmed, Bitcoin may break the resistance level of $70,000. Historical data shows that Bitcoin rose 161.7% before the rate cut in 2019.
DeFi and NFT: A low interest rate environment promotes financing for blockchain projects, and the total value locked (TVL) in DeFi protocols may rebound, with increased activity in the NFT market.
Institutional Investors: Increase Bitcoin allocation, especially as a tool for hedging inflation. The partnership between State Street Bank and Stablecoin Standard in 2025 shows that traditional institutions are accelerating their layout in the cryptocurrency field.
Response Strategy:
Short-term: Pay attention to the Bitcoin options market, layout call options.
Long-term: Diversify investments into DeFi blue-chip projects (such as Aave, Uniswap) to capture liquidity dividends.
Scenario 3: Stance Meets Expectations (Confirmation of Rate Cut in September)
Market Response:
Bitcoin/Cryptocurrency: The market has partially priced in the expectations of a rate cut, with little price volatility. If economic data improves after the rate cut (such as GDP growth exceeding expectations), it may drive a new round of increases.
Stablecoins: Demand for USDT remains stable, but attention needs to be paid to the impact of subsequent economic data on liquidity.
Institutional Investors: Adjust strategies, with some funds shifting from traditional assets to cryptocurrencies, especially if there is an economic soft landing.
Response Strategy:
Short-term: Take advantage of Bitcoin's oscillation opportunities in the $65,000-$68,000 range for grid trading.
Long-term: Pay attention to the progress of Ethereum ETF approvals and layout Ethereum ecosystem projects (such as Layer 2 solutions).
III. Unique Risks and Opportunities in the Cryptocurrency Sector
Risk of Stablecoin Decoupling: During a rate hike cycle, be wary of price volatility in stablecoins like USDT. It is recommended to use decentralized stablecoins (like DAI) to hedge against risks.
Decentralized Exchanges (DEX): Under regulatory uncertainty, DEXs like XBIT may benefit from the demand for safe-haven assets, as they do not require KYC and are resistant to censorship.
Institutional Holdings: The layout of traditional institutions (such as State Street Bank) may change market structure and enhance stability, but be wary of 'smart money' doing the opposite.
IV. Conclusion: Respond Rationally, Layout for the Long Term
Powell's speech will impact the cryptocurrency market through interest rate expectations, regulatory signals, and macroeconomic assessments. Cryptocurrency investors need to:
Pay attention to the clarity of the rate cut path: If a rate cut occurs in September but the subsequent path is unclear, be wary of a 'buy the rumor, sell the news' market.
Monitor the anchoring situation of stablecoins: The USDT decoupling may become a turning point for market sentiment.
Capture institutional capital flow: Traditional institutions' layouts will reshape market structure; pay attention to the movements of institutions like State Street Bank.
Among the three scenarios, the most likely is Scenario 3 (meeting expectations), but be wary of the short-term correction risk caused by Scenario 1 (hawkish stance). In the long term, if the rate cut cycle is confirmed, the cryptocurrency market could welcome a new round of increases, but this requires an economic soft landing as a prerequisite. Investors should remain rational, avoid blindly chasing short-term fluctuations, and focus on long-term value investment.
Trading cryptocurrencies is about doing simple things repeatedly, persistently using one method until it's mastered; trading can be like any other industry, where practice makes perfect, allowing you to make every decision effortlessly.
This year marks my seventeenth year of trading cryptocurrencies. I invested $10,000, and now I earn a living through trading! I can say that I have used 80% of the market's methods and techniques. If you want to take trading as a second career to support your family, sometimes listening more and observing can reveal some insights outside your current understanding, which can help you avoid five years of unnecessary detours!
Follow me @加密大师兄888 to keep up with trends and get rich together! Bulls and bears coexist.
