The Feds attitude has changed from hawkish to dovish, and the policy may be adjusted in September
Although Fed Chairman Powells statement at the FOMC meeting on June 18, 2025 was relatively hawkish, the Feds overall rhetoric has become significantly more moderate. After the June meeting, President Trump publicly criticized the Feds policy stance, and many Fed officials sent out dovish signals in public speeches. Powell himself was more moderate and compromising when he attended a congressional hearing this week.
At present, the Feds reasons for keeping interest rates unchanged are becoming increasingly difficult to justify, as inflation has fallen back to 2.38%, not far from the target of 2.0%. Last Friday, Fed Governor Waller first proposed that the July FOMC meeting might consider a rate cut; then on Monday, Governor Bowman expressed a similar view. Chicago Fed President Goolsbee further downplayed the inflationary impact of tariffs, reinforcing the markets expectations that the Fed will turn to a dovish stance.
Although Powell and several economists have previously warned that tariffs could cause inflation to rise above 3%, this has not happened. Inflation remains stable and the unemployment rate has remained at 4.2% for nearly a year, contrary to the markets original expectations of weak employment. Powell did not refute the more dovish remarks recently. He said that if inflation remains mild, the time for rate cuts may be brought forward. Although the possibility of a rate cut in July is still low, the Fed may send a signal for possible policy adjustments in September at its meeting on July 30.
Corporate credit spreads narrowed again compared to the same period last year, and BTC performance may continue to improve
Earlier this week, affected by the US airstrike on Iran, BTC once retreated to its 21-week moving average ($98,532). This level is not only a key technical support level, but is also often seen as the dividing line between long and short trends. BTC is still in seasonal consolidation, and the Feds shift to a dovish tone may provide mild upward support for prices.
Corporate credit spreads have shown signs of narrowing again compared to the same period last year - a signal that is generally considered bullish in history. Narrowing credit spreads usually reflect improving economic fundamentals, and in this environment, the macro economy and BTC tend to perform better in tandem. This dynamic also shows that although the current data is not enough to prompt the Fed to take immediate action, political pressure may still push it to adjust its monetary policy stance.
The increase in stablecoin inflows coincides with a shortage of market liquidity, with BTC dominating the market
Stablecoin inflows, especially Tether, have started to rise recently. While the overall trend remains volatile, Tether has minted about $12 million since April, while Circles minting activity is relatively limited. This divergence is worth noting because the continued rise of the crypto market has historically relied on strong injections of stablecoins and broader liquidity channels. When the issuance of stablecoins is compared to the overall cryptocurrency market capitalization, the liquidity issue becomes more critical. In the absence of large-scale capital inflows, traders will most likely continue to focus on BTC, which continues to perform significantly better than other crypto assets.
Disclaimer: The market is risky and investment should be cautious. This article does not constitute investment advice. Digital asset trading can be extremely risky and unstable. Investment decisions should be made after carefully considering personal circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.
