Written by: Luke, Mars Finance
In the early morning of March 20th, Beijing time, Federal Reserve Chairman Jerome Powell spoke at a press conference after the FOMC (Federal Open Market Committee) meeting, revealing the latest monetary policy trends to the market. At the same time, a big news came: US President Donald Trump will give a speech at the Digital Asset Summit (DAS) tomorrow (March 20), and according to intelligence at 4:34 a.m., he will release a "major update" on his cryptocurrency strategy at the meeting. This is the first time that the current US president has appeared at a cryptocurrency conference. Driven by this series of events, the price of Bitcoin soared 5% today, breaking through $87,000, and market sentiment has changed from cautious wait-and-see to enthusiastic anticipation. So, what did Powell say yesterday that ignited hope in the market? How will Trump's upcoming appearance add fuel to the rise of Bitcoin?
FOMC meeting: Interest rates are stable and the slowdown in balance sheet reduction has ignited market confidence
Yesterday's FOMC meeting was the focus of this week, with global investors holding their breath for the latest decision of the Federal Reserve. As expected, the federal funds rate remained unchanged at 4.25%-4.50%. This range has not been adjusted since the end of last year and has long been fully digested by the market. However, what really caught the market's attention was Powell's announcement of a key adjustment in his subsequent speech: starting in April, the Federal Reserve will slow down the pace of quantitative tightening (QT) and reduce the monthly balance sheet reduction from US$25 billion to US$5 billion.
Powell gave a detailed explanation. He said that this adjustment is not a shift in monetary policy, but a "technical decision" to make the balance sheet reduction cycle longer and more sustainable. In layman's terms, the previous high-speed balance sheet reduction pace could reduce the balance sheet to the target level within half a year, but now that the pace has slowed down, this process may last about 15 months. He particularly emphasized that the Fed has no intention of sending a signal of easing by suspending or stopping balance sheet reduction, but hopes to maintain the "deterrent effect" on the market to prevent investors from mistakenly believing that the policy is about to be significantly relaxed.
For high-risk assets such as Bitcoin, subtle changes in liquidity can often trigger violent reactions. Since the Fed launched QT in 2022, the tens of billions of dollars of funds withdrawn from the market each month have tightened the financial environment and put pressure on the prices of assets such as Bitcoin. Today, the scale of the balance sheet reduction has dropped from $25 billion to $5 billion, which means that the monthly withdrawal has dropped by four-fifths, which is equivalent to injecting a mild "liquidity tonic" into the market. Although Powell downplayed the policy implications of this adjustment, investors clearly see it as a positive signal. The Fed seems to be exploring a strategy: while maintaining high interest rates to curb inflation, it supports the economy by slowing liquidity tightening. This combination of "high interest rates + slight relaxation" is exactly the environment that risky assets dream of, and Bitcoin naturally smells an opportunity to rise.
Powell's remarks on the economy and inflation: the art of balancing caution
When talking about the US economy, Powell sounded cautiously optimistic. He said that the US economy and labor market remain resilient, with unemployment remaining low and job growth slowing but still solid. However, he also admitted that there are some worrying signs in recent data: consumer spending is slowing, and corporate and market confidence has declined. He summarized this situation as "increasing uncertainty in the economic outlook", showing his concern about the slowdown in growth. But at the same time, he showed no signs of rushing to act, but reiterated that the Fed will maintain a "patient wait-and-see, data-driven" stance and flexibly adjust policies based on future economic data.
Inflation was the top priority in Powell's speech. He said bluntly that the current inflation level is still higher than the Fed's long-term target of 2%, and short-term inflation indicators have even shown signs of rising recently. More strikingly, for the first time, he clearly attributed part of the inflationary pressure to tariff policies. The tariff measures recently introduced by the Trump administration are believed to have pushed up the prices of imported goods, which in turn were transmitted to the consumer end. Powell admitted that this impact is difficult to quantify accurately, but it is undoubtedly an important driver of rising inflation. However, he did not show a hawkish attitude, such as suggesting raising interest rates to fight inflation, but chose a neutral tone, emphasizing that the Fed needs to find a balance between controlling inflation and supporting economic growth.
This "two-handed" statement is a subtle positive for Bitcoin. On the one hand, rising inflation may push up real interest rates and put some pressure on risky assets; on the other hand, Powell did not close the door to future easing, and even hinted that he would take action when the economy weakened. This flexibility prevented the market from panicking due to hawkish expectations and paved the way for Bitcoin's rise. More importantly, inflation concerns caused by tariffs may exacerbate the risk of "stagflation" - the coexistence of slowing economic growth and rising prices. This environment tends to enhance Bitcoin's safe-haven appeal as "digital gold" and provide additional support for its price.
Dot plot and future expectations: the path of interest rate cuts is stable, but differences are hidden
The economic forecasts and dot plots released at the meeting are another focus of investors. The dot plot shows that Fed officials' expectations for two rate cuts in 2025 and 2026 remain unchanged, with each rate cut of 25 basis points, a total of 100 basis points, which is consistent with previous forecasts. This result shows that the Fed has not significantly adjusted its long-term policy path due to inflationary pressures or economic slowdown. However, Powell mentioned in his speech that the number of officials supporting a more cautious stance has increased, and internal differences on the timing of rate cuts are widening.
The source of this divergence is not hard to understand. On the one hand, signs of slowing growth may require earlier or more monetary stimulus; on the other, the stickiness of inflation and the push-up effect of tariffs make it difficult for the Fed to relax easily. The hawkish tone of the dot plot - Powell made it clear that he has no intention of cutting interest rates before the fourth quarter - suggests that a significant easing is unlikely in the short term. However, for Bitcoin investors, the fact that the expectation of rate cuts has not been reduced is enough to avoid the selling pressure brought about by the hawkish turn, and the actual positive of slowing balance sheet reduction has further ignited market confidence.
It is worth noting that although the dot plot maintains the expectation of two rate cuts, the game between the market and the Fed seems to have ended in "market defeat" again. Some analysts pointed out that if the Fed complies with market expectations, predicts three rate cuts and suspends balance sheet reduction, Bitcoin may directly rush to $90,000 today. However, the reality is that the Fed has chosen a more conservative path, showing that it prioritizes inflation control rather than economic stimulus. This neutral and hawkish stance has limited the momentum of Bitcoin's reversal in the short term, but the "step back" of slowing balance sheet reduction has still injected a hint of optimism into the market.
Trump's speech at the Crypto Conference: Policy expectations will ignite the market
Just as the FOMC meeting ended, Bitcoin received another boost: Trump will release a "major update" on his cryptocurrency strategy in tomorrow's DAS speech. This is the first time that the current US president has participated in a cryptocurrency conference, which is of great significance. Since the 2024 campaign, Trump has been a staunch supporter of the crypto industry, promising to make the United States a "crypto capital." After taking office, he took quick action: signing an executive order on March 6 to launch a strategic Bitcoin reserve plan based on confiscated assets; at the White House Crypto Summit on March 7, he further released positive signals. Today, his DAS speech is seen as a key node for policy implementation.
This "major update" may involve the expansion of national crypto reserves, the optimization of the regulatory framework, and even the integration of cryptocurrencies into the economic recovery plan. Trump mentioned Bitcoin, Ethereum, XRP, etc. as reserve options in his Truth Social post on March 2, which triggered a round of gains at the time. If he fulfills his promise tomorrow, such as clarifying the size of the reserve or introducing tax incentives, it will inject long-term upward momentum into Bitcoin.
However, given Trump's past history of "talking big", the market should not have too high expectations. After all, it will take time to test whether his promises will be fulfilled.
Why did Bitcoin surge 5%? The resonance of liquidity and confidence
Today's 5% rise is the result of multiple factors. First, the slowdown in the balance sheet reduction at the FOMC meeting has relieved the market. The reduction from $25 billion to $5 billion means a significant reduction in monthly withdrawals and reduced liquidity pressure. Powell's neutral statement avoided hawkish panic, and the inflation concerns caused by tariffs strengthened Bitcoin's safe-haven properties. Second, Trump's DAS speech expectations have ignited speculative enthusiasm. Investors are looking forward to policy dividends and believe that the United States may take a historic step in the field of encryption.
However, the data also revealed some calm signals. In the past 24 hours, the turnover rate of Bitcoin has fallen instead of rising, indicating that many investors are still waiting and not in a hurry to trade on a large scale. The market seems to be waiting for the double confirmation of the FOMC and Trump's speech, and short-term funds remain restrained. The chip concentration area of 93,000 to 98,000 US dollars has not been threatened for the time being, and the mood of losing investors is relatively stable. This shows that the 5% increase is more driven by emotions rather than the starting point of a full reversal.
source：@Phyrex_Ni
From a broader perspective, Bitcoin's "digital gold" attributes are fermenting. Tariffs push up inflation and economic growth slows down, and these "stagflation" signs are the stage for Bitcoin. Combined with Trump's policy endorsement, Bitcoin is both a speculative asset and a safe-haven option. Today's rise is just a preliminary manifestation of this logic.
How far can the rally go? April becomes a critical point
This 5% rise is driven by both the FOMC and Trump's expectations, but whether it can continue is still uncertain. In the short term, the slowdown in balance sheet reduction and Trump's potential benefits may continue the rebound momentum. If the speech tomorrow delivers on the heavy promises, such as clarifying the size of Bitcoin reserves, Bitcoin may hit a higher point. However, the market also needs to be alert to risks: if inflation gets out of control and exceeds expectations, the Fed may be forced to tighten; if Trump's policies fail, the gains may be quickly reversed.
In the medium and long term, April will be a critical node. The full manifestation of the tariff effect and the first quarter GDP data will test the resilience of the economy. If growth slows further, the Fed may accelerate the pace of easing, providing more room for Bitcoin; if inflation rises and intensifies, tightening policies may suppress risky assets. In addition, the trend of Bitcoin has not yet changed from "rebound" to "reversal". Powell acknowledged the slowdown in growth but was not in a hurry to cut interest rates. The tariff issue is still a headache for the Fed, which limits the establishment of reversal conditions.
Conclusion: Prelude or Climax?
In general, Powell's cautious balance yesterday gave the market a green light, the slowdown in balance sheet reduction ignited hopes for liquidity, and Trump's DAS speech tomorrow gave Bitcoin an imaginary wing. Today's 5% surge is just a prelude, and the real drama will unfold tomorrow. If Trump fulfills his expectations, Bitcoin may usher in a new high; if he fails, it may be a short-lived firework. In any case, this feast of monetary policy and crypto vision has just begun, and the next economic data and policy details will determine the next stop for Bitcoin. Let us wait and see.
