With the tariff storm leading to an unexpected drop in CPI, can the Federal Reserve's interest rate cut trigger a global asset frenzy?

Fed rate cut in June is a foregone conclusion? This article is from an article written by SuperEx and is compiled, compiled and written by Vernacular Blockchain. (Executive Summary: Fed Releases March Meeting Minutes: U.S. Inflation and Economic Slowdown Risks; The market expects two interest rate cuts left this year) (Background supplement: US CPI "unexpected decline" in March The probability of the Fed cutting interest rates has increased, but why don't bitcoin and U.S. stocks rise but fall? Last week, global markets were rocked by the wild swings in the U.S. stock market. After the market plunged after the news of the "reciprocal tariffs" caused the market to plummet, the White House announced a 90-day moratorium on certain countries, and the market quickly reversed and soared. The Dow Jones Industrial Average surged more than 2,900 points, or 7.87%, to its biggest one-day gain since March 25, 2020, the S&P 500 rose 9.52%, its biggest gain since October 29, 2008, and the Nasdaq surged 12.16%, its second-largest one-day gain in its history. The "Big Seven" technology stocks soared across the board, with their total market capitalization surging $1.85 trillion in just a few hours. "The U.S. stock market fluctuates like an altcoin, and the world has become a huge game of smashing." This rhythm is familiar, yes – this is exactly what we often see in the altcoin market with wild price swings. Many market analysts can't help but exclaim: However, the surprise from the United States did not stop there. The March CPI data was much lower than expected: the year-on-year increase was only 2.4%, which was lower than market forecasts and even fell by 0.1% month-on-month. Core CPI was similarly disappointing, reaching a four-year low. Unadjusted core CPI rose 2.8% y/y in March, falling for the second consecutive month to its lowest level since March 2021 and below market expectations of 3.0%. These two sets of data not only surprised the market, but also prompted investors to reassess the policy outlook of the US Federal Reserve. The market reacted quickly: spot gold initially rose $6 and then retreated; The dollar index fell 20 points in the short term; GBPUSD extended intraday gains to 1.00%. In the face of such data, many market analysts now believe that the US Federal Reserve rate cut in June is almost a foregone conclusion. Wall Street Journal economist Harriet Torry pointed out that under normal circumstances, the year-on-year slowdown in CPI growth would be seen as positive news. This is naturally also good news for the crypto market. As the US Federal Reserve's benchmark interest rate falls, the crypto market may usher in a new round of revaluation. Relative pricing effects of low risk-free rates The US 10-year yield has fallen to 4.28% from its 2023 high of 4.8% ( recent low of 4.18% before rebounding 10 basis points ). Declining returns on traditional fixed income assets have driven capital flows to riskier assets. In the case of Bitcoin, its correlation with Treasury yields in 2023 is as low as – 0.73. During the rate cut cycle, the opportunity cost of holding crypto assets is significantly reduced, thereby enhancing their attractiveness. According to the Goldman Sachs model, for every 25 basis point rate cut, the Bitcoin market cap could rise by 6-8%. Reinforcing the 'digital gold' narrative Bitcoin's 90-day correlation with gold rose to 0.35 from 0.12 in 2023 and reached 0.68 during the Silicon Valley banking crisis. When interest rate cuts coincide with rising recession risks, the safe-haven value of crypto assets may be reassessed. A report by Grayscale (Grayscale) states that for every 1% drop in real interest rates, Bitcoin's valuation baseline could increase by 15%. Historically, the US Federal Reserve rate cut cycle has been accompanied by a broad rise in asset prices. With easy liquidity and falling cost of capital, investor interest in risky assets has increased – this is especially evident in the crypto market. As highly volatile, high-risk tools, crypto assets are extremely sensitive to changes in liquidity. When the US Federal Reserve releases monetary easing signals, idle capital tends to chase higher returns, and crypto assets with high return potential quickly come into focus. The economic logic of deflationary tokens Against the backdrop of the expected depreciation of fiat currencies, the scarcity premium of fixed-supply cryptocurrencies is becoming increasingly prominent. This built-in deflationary property adds to the anti-inflation appeal during the rate cut cycle. Catalysts used by institutions Interest rate cuts amplify "asset shortage" Lower interest rates reduce yields in traditional financial markets ( such as bonds, money market funds, ), and create reallocation pressure for institutions. Long-term investors such as insurance companies, pension funds and family offices are likely to shift some of their capital to growth emerging markets. As regulatory infrastructure such as ETFs, custody, and audits steadily mature, crypto assets are becoming increasingly viable for compliant investments. In the case of low returns in traditional markets, institutions may include Bitcoin and Ethereum in a diversified portfolio. Crypto ETFs Synchronize with Rate Cut Cycles By the end of 2024, the United States approved the listing of multiple spot Bitcoin ETFs, a pivotal moment for institutional funds to enter the crypto market publicly. If the rate cuts are synchronized with the ETF boom, the dual momentum of institutional inflows and aggregate liquidity expansion could further amplify the upside potential of the crypto market. On-chain activity in the crypto ecosystem revives DeFi market recovery During the rate hike cycle, DeFi platforms struggled to compete with the low-risk rewards of U.S. Treasuries, resulting in a decline in total lock-up (TVL). As risk-free yields decline, DeFi returns become attractive again, attracting capital back. Leading protocols such as Compound, Aave and Lido have shown signs of TVL recovery. With on-chain borrowing rates stabilizing and stablecoin spreads widening, capital efficiency gains – improving the liquidity of the DeFi ecosystem. NFT and GameFi markets are back in the spotlight Interest rate cuts release capital and reignite users' enthusiasm for highly volatile, high-engagement assets such as NFTs and GameFiTokens. Historically, NFT market activity has typically lagged Bitcoin's rise and exploded in the second phase of the Great Bull Market. A rate cut by the US Federal Reserve could open up new upside for these application-layer assets. In short, the US Federal Reserve rate cut has laid the foundation for a new upward cycle in the crypto market. From liquidity injections, capital reallocation to institutional entry, on-chain activity, and the funding environment – interest rate cuts provide systemic tailwinds for the crypto industry. As the US Federal Reserve opens the floodgates of liquidity, crypto assets are evolving from fringe speculative assets to mainstream macro-view allocation tools. This transformation is driven by both traditional financial giants and technological breakthroughs, accompanied by a deep reshuffle in the market and value reconstruction. Of course, the market won't turn overnight. Regulatory transparency, technical infrastructure, and security challenges still need to be addressed. But driven by the dual engine of "monetary easing + asset innovation", the crypto market may usher in a new structural rally in the coming year. For investors and builders, understanding policy cycles and market rhythms will be key to dealing with bull and bear markets. Related reports Bloomberg scolds Trump for making $1 billion through "crypto regulatory cheating": preemptively occupy land before new regulations Apple breathes a sigh of relief! Trump announced: mobile phones, computers and other electronic products are exempted from tariffs, iPhone does not rise? "Car dealers call me willing to pay a higher price to buy back", Trump's tariff war sets off a miracle of buying used cars in the United States 〈The tariff storm to the unexpected fall of CPI, deducing whether the Fed can cut interest rates...