A statement from Federal Reserve hawkish governor Christopher Waller has become a 'thunderclap' shaking global markets: 'All data indicates we should lower interest rates in December.' As a core decision-maker who has long advocated for a tough stance against inflation, Waller's direct and unhedged remarks carry far more significance than the vague hints from dovish officials — this suggests that the aggressive rate hike cycle initiated by the Fed in March 2022 (with rates skyrocketing from 0-0.25% to a 22-year high of 5.25%-5.5%) is about to officially shift toward easing. This policy turning point not only affects Wall Street's nerves but also puts cryptocurrency market traders into an 'all-weather monitoring' mode.
In the past two years, the Federal Reserve has aimed to 'suppress 40-year high inflation', cumulatively raising rates by 525 basis points, at one point bringing the core PCE inflation rate down from its peak of 6.1% in June 2022 to 3.5% in October 2023, gradually approaching the 2% policy target. However, the side effects of tightening have begun to manifest: in October, the U.S. non-farm payrolls added only 150,000 jobs (below the expectation of 180,000), and the unemployment rate slightly rose to 3.9%; personal consumption expenditures grew only 0.2% month-on-month, the lowest in nearly six months; manufacturing PMI has been in a contraction range for four consecutive months. The 'cooling signals' of the economy have begun to tilt the Federal Reserve's policy balance, and Waller's speech is a clear confirmation of this trend.
The market's response was almost instantaneous: the yield on the 10-year U.S. Treasury bond plummeted 15 basis points in one day to 4.2%, marking the largest drop in two months; the U.S. dollar index (DXY) fell below 103, retreating 3% from the October high; the S&P 500 Index rose by 1.8%, and the Nasdaq 100 Index increased by over 2%, as capital began to flood into growth stocks and commodities — this scene is strikingly similar to the market movements following the Federal Reserve's initiation of zero interest rate policies in March 2020.
For the cryptocurrency market, this is undoubtedly the long-awaited 'policy tailwind'. Historical data has long validated the strong correlation between interest rate cuts and crypto assets: in March 2020, after the Federal Reserve cut rates to zero and launched unlimited quantitative easing (QE), cheap money propelled Bitcoin from a low of $3,800 to a peak of $69,000 in November 2021, an increase of up to 17 times; Ethereum rose from $100 to $4,891 during the same period, an increase of over 47 times; the total value locked (TVL) in the DeFi (decentralized finance) space surged from less than $1 billion to $180 billion, and altcoins like Solana and Cardano staged 'hundredfold increases'. The core logic is that interest rate cuts lower real interest rates, and when the yield on traditional fixed-income assets drops to low levels, funds seeking high returns will inevitably flow into high-risk, high-volatility assets like cryptocurrencies — especially against the backdrop of renewed expectations for global liquidity easing.
More importantly, interest rate cuts are typically accompanied by a weaker dollar. Following Waller's speech, the dollar index has reached a new low in two months, while the correlation between the dollar and Bitcoin has long maintained around -0.6 (negative correlation): when dollar credit is diluted, investors actively seek decentralized, sovereign currency-immune alternative assets. In addition to Bitcoin as 'digital gold', Ethereum's Layer 2 expansion ecology, AI concept tokens (such as Fetch.ai), and Real-World-Assets (RWA, tokenization of real-world assets) are more likely to become the focal points of capital pursuit — these sectors are currently valued at historically low levels and have practical application scenarios, expected to achieve 'valuation recovery + performance growth' through dual drivers during the liquidity easing cycle.
But beneath the revelry, hidden worries remain. Goldman Sachs analyst Alex Hutchinson warns: “If the Federal Reserve's interest rate cuts are interpreted as a 'panic response to economic recession' rather than 'orderly easing after inflation is under control', the market may fall into severe turmoil.” Historically, in January 2008, the Federal Reserve's emergency rate cut of 75 basis points (exceeding the market expectation of 50 basis points) sparked panic over the subprime mortgage crisis, causing the S&P 500 Index to drop 12% within a week. At that time, the relatively small cryptocurrency market also sharply corrected alongside risk assets; in July 2022, the Federal Reserve unexpectedly raised rates by 75 basis points, and Bitcoin plummeted 15% in one day. Although the cryptocurrency market's market capitalization has rebounded to $1.2 trillion (doubling from the 2022 low), it still lacks mature risk hedging tools, and its sensitivity to policy signals far exceeds that of traditional financial markets — once interest rates are cut and economic data worsens further, 'risk aversion' may replace 'risk appetite', leading to rapid capital withdrawal.
Moreover, regulatory risks still hang over the cryptocurrency market like the 'Sword of Damocles'. Currently, the SEC is still pursuing lawsuits against leading exchanges like Coinbase and Binance, and the approval of Bitcoin spot ETFs has yet to be finalized. Even if liquidity easing brings capital inflows, the uncertainty of regulatory policies could still limit gains and even trigger periodic corrections.
Even so, the warming of market sentiment is irreversible. The CME FedWatch Tool shows that the probability of a 25 basis point rate cut in December surged from 30% before Waller's speech to 78%, with the probability of a 50 basis point cut also rising to 12%; Bitcoin's price has remained above $37,000, up 20% from the October low, and the open interest in the futures market has increased to $15 billion, a three-month high; the market capitalization share of altcoins has rebounded from 38% in October to 42%, with funds beginning to spread from Bitcoin to mid- and small-cap tokens. These signals indicate that investors are actively betting on the dividends brought by the policy turning point.
Ultimately, Waller's speech is not only a preview of interest rate policy but also a 'signal' for the global liquidity cycle switch. For cryptocurrency investors, this is both a dawn — the easing environment will provide fertile ground for Web3 innovation and institutional entry; and a test — the need to distinguish between 'policy-driven short-term speculation' and 'quality assets with long-term value'. Regardless, the Federal Reserve's meeting in December is bound to become a key juncture determining the direction of the cryptocurrency market in 2025.
