Written by: Golem, Odaily Planet Daily

On the evening of August 22, Federal Reserve Chairman Powell's last appearance at Jackson Hole during his term opened the door for a potential interest rate cut, the last one announced by Powell occurring on December 18, 2024. After a long drought, the market responded positively. The three major U.S. stock indices closed higher, with the Dow Jones initially up 1.89%, the S&P 500 index up 1.52%, and the Nasdaq Composite index up 1.88%. At the same time, several stocks in the U.S. crypto sector rebounded, with SharpLink rising 15.69%, Bitmine up 12.07%, Coinbase up 6.52%, Circle up 2.46%, and Strategy up 6.09%.

The crypto market also performed impressively, with the total market capitalization of cryptocurrencies returning to $4.1 trillion, mainly driven by Ethereum. On August 22, ETH rose over 14.33%, reaching a peak price of $4,887.5, setting a new historical high after 3 years and 9 months. Additionally, influenced by ETH's new high, multiple tokens in the ETH Layer 2, staking, and infrastructure sectors saw widespread gains, with SSV up 24% over 25.54%, ETHFI up 20.67%, ENA up 17.58%, and ARB up 9.53%.

According to Coinglass data, the liquidation amount for ETH in the past 24 hours surpassed that of BTC, with a major short position liquidated ($368 million).

Powell's Dovish Remarks Spark Market Frenzy

The market is anticipating interest rate cuts from the Federal Reserve in 2025 to stimulate the economy, but since January, Powell has not hinted at any signals for rate cuts in his public speeches. The most anxious about Powell's "stubbornness" is none other than U.S. President Trump, who has been pressuring Powell to cut rates since taking office this year, even going so far as to declare he would fire Powell.

However, the Federal Reserve has also been "cornered" this year, facing potential upward price pressure and intensified inflation from Trump's tariff policies on one side, and signs of a cooling labor market on the other. If they choose to raise rates to stabilize inflation, it could lead to soaring interest rates and trigger "financial panic," but if the Fed cuts rates too early to stimulate the economy, it could lead to uncontrollable inflation expectations.

In this dilemma, more people expect Powell to still lean towards a hawkish stance. BitMEX co-founder Arthur Hayes even predicts that Powell will become "Volcker 2.0" (Odaily Note: Volcker was the Federal Reserve Chairman in the 1970s and 80s, whose extremely tough monetary policy reversed the high inflation crisis and restored the Fed's credibility and independence).

However, Powell's speech on the evening of August 22 surprised the market, with the probability of a 25 basis point rate cut in September rising from 75.5% before Powell's speech to 91.1%. Powell stated, "Given that the labor market is not particularly tight and faces increasing downside risks, (the outcome of sustained inflation) seems unlikely," and directly declared, "If a tight labor market poses a risk to price stability, it may be necessary to take preemptive action."

These remarks indicate that Powell is shifting towards a dovish stance, expecting the inflation effects of tariffs to gradually fade, while a weak labor market will push the Federal Reserve to cut rates to support a weakening job market.

Powell's shift has sparked tremendous enthusiasm in the market, becoming a major driver for ETH's daily rise of over 10%. Nevertheless, the proud Trump mocked after Powell's speech, saying, "Powell should have cut rates a year ago; it's too late to signal a rate cut now."

What’s Next for ETH?

With ETH's rise, Ethereum's market capitalization has surpassed that of payment giant Mastercard, ranking 26th globally in asset market value. Yesterday, ETH rose over 10% and briefly broke new highs. Besides the favorable impact of Powell's dovish remarks, some believe that the direct reason for ETH's new high is actually market short squeezes. So, after the temporary emotional surge, how will ETH perform in the future?

Many remain optimistic. Tom Lee stated after Powell's speech that Powell's remarks were interpreted as dovish, which was expected and favorable for cryptocurrencies (BTC, ETH). "Marshal e" Liquid Capital (formerly LD Capital) founder Yi Lihua also posted, "ETH has ended a week-long bear market, consistent with our expectation of a confirmed rate cut, welcoming a new round of increases together."

Although Arthur Hayes initially believed there would be no rate cut signals before Powell's speech, he still stated in an interview, "As long as ETH breaks its historical high, the upward space is completely opened, and the price will reach $10,000 – $20,000."

On-chain Whales Switching to ETH

On-chain whales have also begun to vote with their feet. After Powell's speech, as ETH's price broke new highs, a Bitcoin OG deposited 300 BTC into Hyperliquid to switch to ETH, having already gained over $160 million in unrealized profits, now holding 118,277 ETH and a long position of 135,265 ETH.

At the same time, a much-watched whale betting on "a $125,000 rolling long position on ETH" placed bets on rate cuts before Powell's speech. With the nighttime surge, he increased his position through unrealized profits, raising his ETH holdings from 4,000 when he opened the position on the morning of August 22 to 25,100, with a position value of $120 million and unrealized profits of $5.5 million, currently with a liquidation price of $4,666.

The "Maji Brother" Huang Licheng, who has "infinite bullets," has also closed his long positions in BTC, HYPE, PUMP, YZY, etc., at a loss. The only position left is a 25x leveraged long position in ETH, with unrealized profits exceeding $3 million and total profits around $37 million, indicating his continued optimism for ETH's future.

However, there are signs of overheating in the market, and traders should remain rational. A FOMO trader sold 2,277 ETH (worth $9.57 million) at a price of $4,203 five days ago, and about six hours ago, due to FOMO, bought 1,966 ETH (worth $9.57 million) at a price of $4,869. Currently, he has incurred a loss of about 311 ETH (worth $1.5 million).

Although Powell has sent positive signals for a rate cut, the actual outcome remains uncertain. Federal Reserve's Harker cautiously stated after Powell's speech, "I heard that Federal Reserve Chairman Powell is 'open-minded' about the policy outlook, but the Fed should maintain a moderately tight monetary policy." Federal Reserve's Moussalam also added this morning, "Whether to cut rates should focus on the entire interest rate path, not just the rate decision of a particular meeting. Inflation is already above target levels and poses ongoing risks. The next employment report may be sufficient to prove the need for a rate cut, or it may not, depending on the specifics of the report."

How the crypto market and ETH will perform in the future remains to be seen.

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