Written by: Golem, Odaily Planet Daily
On the evening of August 22, the last time during Powell's term he spoke at Jackson Hole opened the door for a resumption of rate cuts. The last rate cut announced by Powell was on December 18, 2024. A long-awaited rain after a drought, the market responded positively. All three major U.S. stock indices closed higher, with the Dow Jones initially up 1.89%, the S&P 500 up 1.52%, and the NASDAQ Composite up 1.88%. At the same time, several stocks in the U.S. crypto sector rebounded, with SharpLink rising 15.69%, Bitmine rising 12.07%, Coinbase rising 6.52%, Circle rising 2.46%, and Strategy rising 6.09%.
The cryptocurrency market is also performing brightly, with the total market capitalization of cryptocurrencies returning to $4.1 trillion, primarily driven by Ethereum. On August 22, ETH rose over 14.33%, reaching a peak price of $4,887.5, setting a new historical high after 3 years and 9 months. Meanwhile, influenced by ETH's new high, multiple tokens in ETH Layer 2, staking, and infrastructure sectors have seen widespread gains, including SSV with a 24-hour increase of over 25.54%, ETHFI with a 24-hour increase of 20.67%, ENA with a 24-hour increase of 17.58%, and ARB with a 24-hour increase of 9.53%.
According to Coinglass data, the liquidation amount of ETH in the past 24 hours surpassed BTC, primarily from short positions ($368 million).
Powell's dovish speech sparked market euphoria.
The market is looking forward to the Fed cutting rates to stimulate the economy in 2025, but since January, Powell has not disclosed any hints of rate cuts during his public speeches. Facing Powell's 'stubbornness,' the most anxious has been U.S. President Trump, who has been pressuring Powell to cut rates since taking office this year, even declaring at one point that he would fire Powell.
However, the Federal Reserve has also been 'cornered' this year, with one side being Trump's tariff policy potentially bringing upward price pressure and increasing inflation, while the other side shows signs of cooling in the labor market. If the Fed chooses to raise rates to stabilize inflation, it could lead to soaring rates and trigger 'financial panic,' but if it cuts rates too early to stimulate the economy, it could lead to uncontrollable inflation expectations.
In this dilemma, more people expect Powell to lean towards a hawkish stance. BitMEX co-founder Arthur Hayes even predicts Powell will become 'Volcker 2.0' (Note: Volcker was the chairman of the Federal Reserve in the 1970s and 1980s, who reversed the high inflation crisis with extremely tough monetary policies, restoring the Fed's credibility and independence).
However, Powell's speech on the evening of August 22 gave the market a big surprise, with the probability of a 25 basis point rate cut in September rising from 75.5% before Powell's speech to 91.1%. Powell stated in the speech, 'Given that the labor market is not particularly tight and faces increasing downside risks, (the continuous rise in inflation) seems unlikely to occur,' and directly declared, 'If a tight labor market poses risks to price stability, it may be necessary to take preemptive action.'
These remarks all prove that Powell is turning dovish, with expectations that the inflationary effects of tariffs will gradually dissipate, and the weakness in the labor market will push the Fed to cut rates to support the weakening job market.
Powell's shift has sparked tremendous enthusiasm in the market, which became the main driver for ETH's daily gain of over 10%. Despite this, the proud Trump mocked after Powell's speech, saying, 'Powell should have cut rates a year ago; it's too late to signal a rate cut now.'
What will the future of ETH be like?
With ETH rising, Ethereum's market cap has surpassed that of payment giant Mastercard, ranking 26th globally in asset market capitalization. Yesterday, ETH rose over 10% in a day, briefly breaking new highs. In addition to Powell's dovish speech being favorable, some believe the direct reason for ETH's new high is actually the market squeeze. So, after the short-term emotional landing, how will ETH perform in the future?
Many remain optimistic. Tom Lee stated after Powell's speech that it was interpreted as dovish, in line with expectations and favorable for cryptocurrencies (BTC, ETH). 'Marshal e' Liquid Capital (formerly LD Capital) founder Yi Lihua also remarked, 'ETH has ended a week-long bear market, and the rate cut we expected is confirmed. Let's welcome a new round of increases together.'
Although Arthur Hayes initially believed there would be no signals for a rate cut before Powell's speech, he stated in an interview, 'As long as ETH breaks its historical high, the upside space will be completely opened, and the price will be between $10,000 and $20,000.'
On-chain whales are shifting to ETH.
On-chain whales have also begun to vote with their feet. After Powell's speech, as the price of ETH broke new highs, a Bitcoin OG deposited 300 BTC into Hyperliquid to exchange for ETH, gaining over $160 million in unrealized gains, now holding 118,277 ETH and a long position of 135,265 ETH.
Meanwhile, the much-discussed 'whale betting $125,000 on long ETH' placed a bet on rate cuts before Powell's speech. As the market surged overnight, he increased his position through unrealized gains, raising his ETH holdings from 4,000 at the opening on August 22 to 25,100. The position is valued at $120 million, with an unrealized gain of $5.5 million. The current liquidation price of the position is $4,666.
Machiavelli with 'infinite bullets,' Huang Licheng, has also closed his long positions in BTC, HYPE, PUMP, YZY, and others at a loss. He has only retained a 25x leveraged long position in ETH, with unrealized gains exceeding $3 million, and total profits around $37 million, indicating his continued optimism for ETH's future.
However, there are signs of overheating in the market, and traders should remain rational. A FOMO trader sold 2,277 ETH at $4,203 (worth $9.57 million) five days ago, but about six hours ago, due to FOMO chasing high, bought 1,966 ETH at $4,869 (worth $9.57 million). Currently, he has already lost about 311 ETH (worth $1.5 million).
Despite Powell's positive signals for a rate cut, the actual implementation remains uncertain. Federal Reserve's Harmack cautiously stated after Powell's speech, 'I heard that Fed Chairman Powell is 'open-minded' about policy prospects, but the Fed should maintain a moderately tight monetary policy.' Federal Reserve's Moussalem also added this morning, 'Whether to cut rates should look at the entire interest rate path, not just the rate decision of a single meeting. Inflation is above target levels and there are ongoing risks. The next employment report may be sufficient to prove the need for a rate cut, or it may not be, depending on the specific content of the report.'
How will the cryptocurrency market and ETH perform in the future? We will have to wait and see.
