On August 22, at the global central bank annual meeting (Jackson Hole), Federal Reserve leader Powell's remarks were like a spring breeze blowing towards the somewhat fatigued capital market. He hinted at the possibility of adjusting monetary policy, instantly reigniting market expectations for a rate cut in September. As soon as he finished speaking, the cryptocurrency market rebounded, with Bitcoin (BTC) quickly rising from a low of $111,000 to $117,000, and Ethereum (ETH) soaring nearly 15% in a single day, breaking through $4,880 and reaching a historical high.
The market's exuberant sentiment is evident, but a core question also emerges: Is the September rate cut already a done deal? After the rate cut, will the market inevitably embark on a grand bull market? A deeper inquiry is what the ultimate force driving this cycle really is. Behind the short-term optimistic sentiment, a more sober view suggests that compared to a single rate adjustment, who takes over the next Federal Reserve may actually be the real key to determining how far and how high this bull market can go.
'Dovish' voice resounds
In his speech at Jackson Hole, Powell's wording underwent a subtle shift, with the overall tone interpreted by the market as neutral to dovish. He emphasized several key pieces of information:
Signs of cooling in the job market: Powell acknowledged that the U.S. labor market is slowing. The average monthly job growth over the past three months has been only 35,000, far below the 168,000 expected for 2024. He clearly pointed out that employment risks are tilted downward, which 'may require' interest rate cuts to address, in order to avoid more layoffs among companies.
Balancing inflation risks and employment risks: He emphasized that the Federal Reserve will carefully balance its dual mandate of 'price stability' and 'full employment.' Currently, inflation risks are upward, while employment risks are downward, which means that the Federal Reserve's policy balance is beginning to tilt toward boosting employment.
Flexibility of the policy path: Powell reiterated that there is no preset path for future policies, which will be determined entirely based on subsequent economic data.
Although the wording remains cautious, the market quickly captured the dovish signals within. Powell's remarks are widely seen as having opened the door for a rate cut in September. Data shows that the market's predicted probability of a September rate cut has soared to over 80%. This shift in expectations has directly reversed the risk-averse sentiment triggered by strong economic data, driving a strong rebound in both the stock market and the cryptocurrency market.
After Powell's speech, Wall Street's well-known analyst Tom Lee clearly stated that this is a significant 'green light' signal for the stock market and risk assets. He believes that the decrease in funding costs will naturally benefit risk assets, and he is particularly optimistic about tech stocks, small-cap stocks, and cryptocurrencies.
Tom Lee is particularly optimistic about the future of Ethereum. Not only did he join the Ethereum reserve company BitMine as a director in mid-year, but he also compared Ethereum's potential to the moment of Wall Street innovation after the dollar decoupled from gold in 1971. He believes that Ethereum is the core platform for the combination of artificial intelligence and blockchain, and its smart contracts will play a key role in verifying robot identities and the sources of commands. He even boldly predicts that Ethereum's price could reach $15,000.
The flow of funds in the market also seems to confirm this structural shift. Data shows that Bitcoin's market dominance has fallen from its peak, while the total market capitalization of altcoins has been steadily increasing. This indicates that funds are rotating from Bitcoin to other assets with more narrative appeal, especially Ethereum. ETH not only benefits from institutional funds brought by spot ETFs but also carries core narratives such as stablecoin compliance and the tokenization of real-world assets (RWA), making it more attractive to capital.
Interest rate cuts = bull market?
In the intuition of many investors, 'interest rate cuts' are almost equivalent to the start button for a 'bull market.' However, looking back at the five major rate-cutting cycles of the Federal Reserve over the past thirty years, we find that the historical script is far more complex than imagined. The relationship between interest rate cuts and the market largely depends on the context and motivation behind the cuts.
Historically, interest rate cuts can be roughly divided into two categories:
Preventive Cuts: Occur when the economy has not yet entered a full recession, but signs of slowdown or external risks are present. For example, in 1995 to respond to the Asian financial crisis, in 1998 to prevent a hard landing after overheating, and in 2019 to hedge against the risks of global growth slowdown. Such cuts usually successfully inject confidence and liquidity into the market and are often accompanied by rising prices of risk assets.
Rescue Cuts: Occur after a crisis has fully erupted, such as the burst of the internet bubble in 2001 and the global financial crisis in 2008. In such cases, interest rate cuts serve as an emergency rescue measure, which, while avoiding a worse systemic collapse, typically struggle to reverse the downward trend of the market in the short term.
From the current environment, although the U.S. economy faces uncertainties such as a weak labor market and tariffs, it has not fallen into a full-blown recession, and inflation has been somewhat controlled. Therefore, the expected interest rate cuts in the current market are closer to 'preventive cuts,' which provides a relatively favorable macro backdrop for the rise of risk assets.
The history of the crypto market also confirms the critical role of liquidity. The bull market of 2017 was ignited by the ICO craze, backed by the speculative soil provided by a global low-interest-rate environment. The super bull market of 2021, on the other hand, was driven by a liquidity feast propelled by multiple narratives like DeFi and NFTs under the 'flooding' of zero interest rates and unlimited quantitative easing (QE) by the Federal Reserve.
Although the expectations for a rate cut in September 2025 are enough to excite the market, some more forward-looking analysts believe that the true 'deciding factor' of this bull market lies in the choice of the next Federal Reserve leader.
Economist and crypto analyst Alex Krüger has put forward a striking view: what determines the length of this cycle is not Bitcoin's four-year halving cycle, but the personnel changes in Washington—specifically, the successor to Powell that Trump may nominate.
He believes that the market's anxiety about the peak of this cycle is due to the failure to recognize broader macro drivers. Krüger firmly believes that this cycle is far from over because he expects the leadership change at the Federal Reserve to bring about 'significantly more dovish monetary policy than current expectations,' which has not yet been priced in by the market. He recalled that the bull market of 2021 ended in early 2022 not because of the so-called 'four-year cycle' curse, but because the Federal Reserve turned 'extremely hawkish' at that time.
Powell's current leadership term will end in May 2026, but the nomination of a new leader may be announced in advance. The market has already begun to speculate on potential candidates, such as former Federal Reserve Governor Kevin Warsh, who is considered likely to adopt a more accommodative monetary policy than Powell. Once a clear dovish figure is nominated, the market will begin to price in the easing policies expected after their appointment, which may inject a new and more lasting upward momentum into risk assets.
Who will lead in the future?
In summary, the current cryptocurrency market is at a complex crossroads where short-term optimism intertwines with long-term variables. In the short term, Powell's dovish turn has greatly boosted market sentiment, and a 'preventive' interest rate cut is almost a foregone conclusion, providing a solid foundation for the continued rise of risk assets.
However, from a more macro perspective, the impact of a single rate cut is ultimately limited. What can truly define the height and length of this bull market may be the policy tone of the next Federal Reserve. A more dovish Federal Reserve leadership means a longer and stronger liquidity release cycle, which is the ultimate fuel driving asset prices to achieve leapfrog growth.
Therefore, for investors, while enjoying the market dividends brought by the current expectations of interest rate cuts, it is even more important to closely monitor developments in Washington. The interest rate decision in September will determine the short-term rhythm of the market, while the name of the next Federal Reserve leader may determine the ultimate fate of this bull market.
