Before discussing the possible ultimate drop, I want to talk about the Fed's interest rate cut, which I find quite interesting.
The main logic of the Fed's interest rate hikes and cuts revolves around two lines: employment and inflation. The worse the employment, the more likely it is to cut rates; the lower the inflation, the more likely it is to cut rates. When both are favorable for rate cuts or neither is favorable, then it becomes very easy. But if one favors a rate cut and the other opposes it, then it becomes difficult. Unfortunately, the current situation is the latter: employment data is starting to weaken, favorable for a rate cut, while inflation data rebounds, unfavorable for a rate cut. Therefore, old Powell emphasized employment risks and inflation risks during his speech on Friday night, making Fed decision-making very challenging. However, Powell was not as strong in his speech as before, leaving the market with expectations of a possible rate cut.
I believe that Powell's speech this Friday is just gradually wrapping up the play that has been performed over the past few months. Acting? Script?
In fact, as early as the first half of the year, Powell was already preparing for rate cuts. In April, it was the peak of the trade war; in May, Powell hinted at adjusting the Fed's policy framework, expected to be completed around September (those who doubt can check)! This is the beginning of the play, the script was already revealed in May! Friday's speech is gradually drawing the curtain on the script. Powell: The new framework abandons the flexible inflation target set in 2020, and we cannot take stable inflation expectations for granted; the new framework aims to adapt to various economic conditions. In simpler terms, even if inflation doesn't come down, I will start to cut rates, but I can't say it outright; I can only put it nicely!
Some may ask, what kind of play is Powell acting? Of course, he is playing the role of the Fed's independence! Others may say, Powell had a fierce battle with Trump a few months ago and almost ended up in jail, clearly for the sake of the Fed's independence, portraying a glorious image of not fearing threats or power. And this is precisely the purpose of this play: to make the market believe in the independence of the Fed! The ultimate goal of believing in the Fed's independence is for the benefit of the United States! Whether it is Trump or Powell, or whether they are the Fed Chair or the President of the United States, their ultimate goal is the same: American interests first! It’s just that Trump can be more direct in working for American interests, while Powell, representing the dollar's credit and the Fed's independence, faces the global market, and is not as free as Trump. Trump's trade war is for American interests, but it will obviously bring inflation. If Trump's policies are to continue, interest rates must be lowered, but in the case of inflation, it is clearly difficult for the Fed to lower interest rates. So how to lower interest rates in a situation of inflation? Does the Fed not know that inflation is coming? Do they not know it will be difficult to lower interest rates afterwards? Then, the script comes! First, the change in policy framework is hinted at, then Trump variously criticizes the Fed for lowering interest rates, while Powell stands firm, and later uses the Fed building renovation as a threat, yet Powell remains strong and unyielding! Powell's image of being steadfast has deeply rooted in people's hearts. At this moment, it is wonderfully timed to propose the chess piece of the framework change that was planted back in May! Who still doubts the Fed's independence? Powell's exit from office is perfect, and Trump's goal of lowering interest rates is also achieved, a win-win situation, how perfect!
Now let's talk about the upcoming market, if there is one (I hope there isn’t), the possible ultimate drop.
Many people might find it strange on Saturday that it was clearly Fed Chair Powell speaking, and from being hawkish about rate cuts to easing up on Friday night, Bitcoin briefly surged to over 117,000 before entering a downtrend, and Ethereum's explosion also seemed to stall midway. Why is that? Some say it is because other Fed officials lowered the expectations for rate cuts, which indeed has some effect on the highly news-sensitive crypto market, but I believe that is not the main reason. The larger reason is that the market may be reflecting or reacting to why Powell eased up. The market sees rate cuts as beneficial for the financial market, so what does the market worry about? Is it worried that the rate cut is just a bluff? I don’t think so. The real worry is why Powell would ease up in the face of misalignment between employment and inflation. Powell easing up indicates that he places employment ahead of inflation, meaning he believes the risks from poor employment data are greater than those from inflation risks; that poor employment data suggests a possibility of economic recession!
Worrying about a recession is the real reason the market is not singing and dancing at the moment!
Hype about a recession will be the biggest possibility for an ultimate drop before the September rate cut!
Do not underestimate the malice of those people; they can lick the bottom of the bowl clean and will definitely leave not a drop of oil! If there is really going to be an ultimate drop before interest rates are lowered, I believe it is the main forces using the Fed's interest rate cuts to hype the economic recession in the US (I believe the possibility of a recession in the US this year is very low), causing retail investors to throw away their bloody chips, and then later using various positive news to make retail investors buy back at high prices!
My advice is to manage the risk of a possible ultimate drop well, and don't get thrown off the bus easily. If the ultimate drop really comes, it will be a good opportunity for you to increase your position; make sure to seize it!#加密市场回调 #美联储降息预期 
