In the early hours of today Beijing time, the Federal Reserve raised its policy rate by 25 basis points to 3.75%–4.00%, the first rate hike since July 2023. But the market did not show the dramatic volatility that many people had expected.
The reason is actually not complicated.
First, the fact that the Federal Reserve is raising rates has already been fully priced in by the market.
Before the rate decision meeting, market expectations for a 25-basis-point hike have already exceeded 90%. So the real factor affecting prices has never been: “Will the Federal Reserve raise rates?”
Instead, it’s: “After raising rates, will it keep raising them? What exactly will the future path of interest rates be?”
That’s why this time the market’s reaction has been concentrated more on the dot plot, economic forecasts, and policy statements from Powell/Waller, rather than simply the 25-basis-point move. In fact, the latest forecasts show that by the end of 2026 the median federal funds rate has been raised from the prior 3.8% to 4.1%.
So rate hikes themselves are old information; the future path is the new information.
Second, from my personal trading framework, this rally may not have even treated the Federal Reserve as the main storyline.
The market often likes to find a “core narrative” to explain the move. Not long ago, many people focused on: the Fed → rate cuts/hikes → liquidity → BTC.
Then trading resumed: the CLARITY Act → the crypto regulatory framework → altcoins.
But if you extend the time horizon, I actually think these two events are more like stage-by-stage catalysts. What’s truly worth focusing on are two bigger variables:
① U.S.-China relations and the U.S.-China summit
② U.S. midterm elections
Because behind these two events, it’s not a 25bp rate change—it’s global trade, fiscal policy, industrial policy, the dollar system, capital flows, and the political cycle in the U.S. in the future. So the market’s real big move often won’t revolve around a 25bp change that has already been fully anticipated. It will be repriced around the larger policy cycle.
Thirdly, there is a very easily overlooked variable: the BTC and ETH in the market are getting scarcer and scarcer.
This may be more important than a single FOMC meeting. Especially for ETH—right now, the market can’t simply equate “total supply” with “coins that can truly be sold at any time.”
More and more ETH is moving into: staking, ETFs, corporate treasuries, DeFi, smart contracts, and long-term holder addresses.
The market’s data framework also breaks ETH supply into exchange balances, supply in smart contracts, and staked supply, to observe the truly circulating portion that can be sold immediately.
Recent data also shows that the ETH staking ratio has already reached about 32%, while exchange reserves have fallen sharply compared with the 2021 peak. There’s also evidence that since the beginning of this year, ETH exchange reserves have continued to decline; some statistics even indicate a drop of about 15% from early June.
So I’d rather understand ETH like this: total supply hasn’t disappeared, but the supply that’s actually in the market order book and can be smashed and sold at any time is decreasing.
These are completely different concepts, which is also why the market in the future may become increasingly “counterintuitive.”
Previously: more capital → higher coin prices
In the future, it may gradually become: more capital + less tradable supply → even greater amplification of price elasticity. Especially when ETFs, corporate treasuries, staking, and long-term holders absorb supply at the same time, the market’s real “free float” may become thinner and thinner.
This is also the reason for a very interesting phenomenon that has appeared in the ETH market recently:
Supply is tightening more and more, but prices have not immediately risen to the same extent as supply contraction.
This isn’t contradictory, because prices in the short term are determined by marginal buy/sell activity, not by total supply.
So I’m focusing on three levels right now.
First layer: short-term events
The Federal Reserve, CPI, employment data, the SEC—these determine short-term fluctuations.
Second layer: the midterm policy cycle
U.S.-China relations, U.S. fiscal policy, the regulatory framework, and midterm elections—these determine the big-picture direction of market risk appetite.
Third layer: long-term structural changes
ETFs, stablecoins, RWA, DeFi, corporate treasuries, staking, and increasingly fewer tradable coins.
This layer determines whether the crypto market can gradually evolve from a purely speculative market into one with a huge need for financial infrastructure.
So the Fed’s rate hike this time didn’t cause the huge volatility people imagined, and that doesn’t mean rate hikes are unimportant. More precisely: the market has already priced in the rate hike.
What’s truly worth watching now is: the interest-rate path after the hikes, the U.S. fiscal and political cycle, and how U.S.-China relations evolve.
But within the crypto market, I’m increasingly paying attention to another variable: after more and more BTC and ETH are absorbed by ETFs, institutions, corporate treasuries, staking, and long-term holders, how many coins are left that the market can truly trade?
This may be the most worth studying question in the next phase. Macros set the direction, policy sets the catalysts, and the true coin/position structure determines price elasticity.
