The views of Bank of America reflect the widening gap between current market expectations and the Federal Reserve's official stance. From the perspective of the crypto market, this divergence itself is a high-probability trading signal. The market is pricing in economic realities such as slowing inflation and weak employment data, while the Federal Reserve is trying to maintain policy flexibility and avoid prematurely committing to a specific path.
The key point is that the market is no longer passively accepting guidance from the Federal Reserve but is actively interpreting data and taking action in advance. This game is particularly evident in the crypto market, where assets like Bitcoin and Ethereum are extremely sensitive to interest rate expectations. When traditional markets begin to bet on rate cuts, liquidity expectations will first be reflected in the prices of crypto assets, as crypto market trading is 24/7 and responds more quickly to macro changes.
Powell's mention of "data dependence" is actually interpreted by the market as a kind of acquiescence. If the Federal Reserve truly opposed market expectations, they would suppress those expectations with stronger language, as they did in 2023, rather than repeatedly emphasizing their dependence on data. This subtle shift in stance suggests that the Federal Reserve may be preparing for a policy pivot, while hoping to maintain a gradual communication approach.
From the timeline of these articles, it can be seen that market expectations have been brewing since the end of 2024, gradually forming a consensus by 2025. The crypto market often experiences trending behavior in the early stages of such expectations, as digital asset investors usually bet on macro turning points earlier.
For crypto practitioners, the focus is not on whether the Federal Reserve will cut interest rates at a particular meeting, but on the overall trend of liquidity shifts. Even if the Federal Reserve tries to maintain a hawkish stance, as long as economic data continues to weaken, the market will continuously test the Federal Reserve's bottom line, ultimately forcing a policy change. This dynamic process itself is a key factor driving the prices of risk assets.$DOGE
