If you have been paying attention to the market recently, you will certainly agree that the past few weeks have been a veritable explosion of information. Like a series of carefully choreographed fireworks, they have burst forth in the long-silent night sky. At the macroeconomic level, good news has come one after another, as if they were all agreed upon, injecting a long-awaited dose of adrenaline into the global risk asset market, especially the crypto world we are in.
Today, let's unravel the complexities and delve into the 'macroeconomic bonanza'—especially how the unexpectedly strong GDP data from the U.S. and the 'dovish' remarks from the Federal Reserve's 'hawkish bigwig' Waller have worked in tandem to reverse market sentiment and rekindle the risk-on sentiment in the crypto market. This is not just a simple market analysis but an attempt to capture the deep logic and emotional pulse driving capital flows.
First movement: Macroeconomic duet—'Resilience' of the economy and 'shift' in monetary policy.
To understand the crypto market's reaction, we must first focus on the 'traditional' macroeconomics at the center stage. The two recent major events have set the tone for the entire narrative.
Stronger-than-expected 'muscle show': The deeper significance of the U.S. Q2 GDP upgrade.
Not long ago, Wall Street traders were generally shrouded in the shadow of 'economic recession.' However, the data released by the U.S. Bureau of Economic Analysis (BEA) at the end of August 2024 burst through the fog like a ray of sunshine.
Data shows that the annualized real GDP growth rate for the U.S. in the second quarter of 2024 was revised up to 3.0% in its 'Second Estimate.' This figure is significant because it is not only significantly higher than the previous 'Advance Estimate' of 2.8% but also far exceeds the market's overall pessimistic expectations.
What does this 0.2 percentage point upgrade actually mean?
In simple terms, this means that the 'engine' of the U.S. economy is much stronger than we imagine. It is not a rickety old car that might stall at any moment, but an engine that can still output power smoothly. The main drivers of this upgrade come from several key components: consumer spending, private inventory investment, and non-residential fixed investment.
In simple terms, this means:
Consumers are still buying (increase in consumer spending): Whether in services or goods, consumption enthusiasm remains high, which is the most direct manifestation of economic vitality.
Businesses are confident about the future (increase in private inventory investment and non-residential fixed investment): Companies are willing to replenish inventory and invest in equipment and intellectual property products, indicating their expectation of sustained future demand.
This set of strong data largely shattered the market's concerns about a 'hard landing' (a rapid and deep economic recession). It paints an ideal picture of an 'economy that is resilient but not overheating.' This 'Goldilocks' state provides huge leeway for the Federal Reserve's subsequent monetary policy operations, with the economy strong enough to withstand certain policy adjustments, but not explosive enough to pose controllable inflation pressures and open up the imagination space for 'rate cuts.'
The dove's call from the 'hawk king': Waller sounds the prelude to rate cuts.
If the strong GDP data laid a comfortable runway for the market, then the deafening speech by Federal Reserve Governor Christopher Waller on July 17, 2025, was like the starting gun.
Who is Waller? Within the Federal Reserve, he has always been viewed as a staunch representative of the 'hawks'—these types of decision-makers are usually more concerned about inflation and tend to support higher interest rates. However, this 'hawk king' delivered a speech titled 'The Case for Cutting Now' at an event hosted by New York University's Monetary Market Association.
His clear words and firm attitude shocked the entire market. Waller openly stated that he supports a 25 basis point reduction in the policy rate at the upcoming Federal Open Market Committee (FOMC) meeting.
What is his logic? The reasons Waller provided form a perfect closed loop:
The economy is slowing down: He points out that while the GDP data is good, many leading indicators, especially those from the labor market, show that the growth momentum is weakening, and the employment market faces downside risks.
Inflationary pressures are controllable: He believes that the price increases driven by tariffs and other factors are temporary and will not evolve into a persistent inflationary spiral. Therefore, monetary policy can 'ignore' these short-term disturbances.
Policy should trend towards neutrality: Based on the above judgments, he believes that the current restrictive monetary policy is no longer suitable and should lean towards a 'neutral' level to avoid unnecessary harm to the economy.
The power of this speech lies in the fact that it is not just another routine speech by an official. When the staunchest hawks begin to sing dovish tunes, the market interprets it as a broad consensus within the Federal Reserve on a 'policy shift.' Rate cuts are no longer a question of 'whether' but of 'when to start' and 'how much to cut.'
Second movement: Chain reactions—How macro warm winds blow into the crypto world.
Alright, we have finished watching the macro opera. Now, the key question arises: What does this have to do with us in the crypto space? The relationship is significant. Crypto assets, as the most frontline and liquidity-sensitive segment of the risk asset spectrum, pulse in sync with the breath of the macroeconomy.
Liquidity expectations: The 'lifeblood' of the market.
The expectation of Federal Reserve interest rate cuts is like a long-awaited rain after a drought for the crypto market. Its core transmission mechanism lies in 'liquidity'.
Lower funding costs: A rate cut means lower borrowing costs. When funds in the traditional financial world become 'cheap,' more capital will be willing to chase higher-risk, higher-return assets. Cryptocurrencies are undoubtedly one of the top choices on this list.
Declining risk-free rates increase the attractiveness of risk assets: Expectations of rate cuts will directly lower U.S. Treasury yields, especially the 10-year Treasury yield, which is the 'global asset pricing anchor.' Historical data repeatedly proves that when yields on risk-free assets like Treasuries decline, investors will withdraw funds from safe bond markets and direct them towards stocks, cryptocurrencies, and other risk assets in search of higher returns.
Expectations for a weaker dollar index: Generally, a dovish shift from the Federal Reserve will depress the dollar index (DXY). Historically, a weaker dollar often shows a negative correlation with the prices of crypto assets like Bitcoin. A weaker dollar makes Bitcoin, priced in dollars, cheaper for global investors holding other fiat currencies, potentially stimulating buying demand.
The combination of GDP upgrades and interest rate cut expectations is a 'perfect storm' tailor-made for risk assets. The former alleviates fears of an economic collapse, providing a 'safety net' for the market; the latter signals the arrival of 'easing', providing 'fuel' for market rises. This narrative of a 'soft landing' is the best nurturing ground for a return of risk appetite.
Third movement: Sector rotation—the broad rise pattern in the crypto market.
In the wake of this macro warm wind, positive changes have also begun to emerge within the crypto market. Although the search results at hand cannot provide precisely daily price data after the event, based on general market rules and recent observations, we can clearly see a path of risk appetite transferring gradually.
Bitcoin and Ethereum: The 'stabilizing anchors' of the market are the first to stabilize and rebound.
As the 'blue-chip stocks' and the most liquid assets in the crypto market, Bitcoin and Ethereum are always the first receivers of macro sentiments. When the market anticipates improvements in liquidity, they are the most direct beneficiaries.
The barometer for institutional funds: For institutional investors holding large sums of money and extremely sensitive to macroeconomic environments, a clear signal of a shift in monetary policy is key to adjusting their positions. The existence of compliant channels like Bitcoin ETFs allows these funds to easily enter the market, with BTC and ETH naturally being their preferred targets.
From 'risk aversion' to 'value appreciation': Market sentiment shifts from a defensive posture worried about 'how long the bear market will last' to an offensive stance of 'not wanting to miss the starting point of the next bull market'. This shift is first reflected in the increased holdings of BTC and ETH.
The spring revival of DeFi: Dual expectations for TVL and yields.
The story of decentralized finance (DeFi) is even more subtle and fascinating.
The temptation of interest rate spreads: When the Federal Reserve cuts interest rates and the risk-free rates in the traditional financial world (such as Treasury yields) decline, the various yields offered by DeFi protocols (like staking and liquidity mining) become particularly attractive. Seeking yield, 'hot money' will overflow from TradFi into the DeFi world in search of new opportunities.
The return of TVL: The influx of capital will directly push up the total locked value (TVL) of DeFi protocols. Previous data showed that although DeFi's TVL reached $200 billion in the second quarter of 2025, the financing amount significantly decreased, indicating that the market needs new catalysts. The improvement in macro liquidity is precisely that most powerful catalyst. A higher TVL not only signifies a flourishing ecosystem but will also directly increase the value of governance tokens related to DeFi protocols.
NFTs and GameFi: The ultimate thermometer for risk appetite.
If BTC and ETH are the ballast stones of the market, then DeFi is the engine, while NFTs, GameFi, and various meme coins serve as the 'ultimate thermometer' for market sentiment.
These sectors are typically regarded as being at the very end of the risk curve, and their performance is highly correlated with market speculation sentiment and users' disposable income (wealth effect). In bear markets, they often suffer the most significant declines and are the first to be abandoned.
However, when the macro environment warms up and market risk appetite fully returns, these high Beta sectors often exhibit astonishing resilience. When investors feel that their BTC and ETH portfolios are appreciating, they are more confident in purchasing a favorite NFT image or investing in a certain blockchain game. Although some data indicates that NFT market trading volumes declined at the beginning of 2025, there are also signs that, under boosted sentiment, market trading volumes can rebound rapidly. Therefore, the recovery of the NFT and GameFi sectors will be the strongest proof that market sentiment has truly shifted from 'cautious' to 'greedy'.
Final chapter: The prelude to a carnival? Maintaining cautious optimism.
In summary, we are witnessing a classic macro-driven market reversal script: Strong economic data (GDP upgrades) provides fundamental support, while clear expectations for monetary easing (Waller's dovish speech) offer liquidity catalysts. The combination of these two is effectively restoring market confidence, driving capital from safe-haven assets to risk assets, with the crypto market as a whole basking in this spring breeze.
However, we must be clear-headed that everything we are discussing today (September 2, 2025) is based more on 'expectations'. The door to the Federal Reserve's rate cuts is only slightly ajar and has not been fully opened.
The future market path still depends on the upcoming inflation data, employment reports, and the final statements from the Federal Reserve Chairman and other officials. Any unexpectedly bad news could douse the newly ignited party.
However, regardless, compared to the struggles under the shadow of rate hikes over the past year, the current environment is undoubtedly the friendliest for the crypto market since this cycle's adjustment. It marks a potential turning point—from passive defense to actively seeking opportunities. For each of us involved, it is both a challenge and an opportunity.
Stay sharp, stay thoughtful, and let us witness whether this is merely a brief rebound or the true prelude to a new cycle.