On June 25, Hu Jie, former senior economist at the Federal Reserve and professor at Shanghai Jiao Tong University’s Shanghai Advanced Institute of Finance, was a guest at the Huobi VIP Lecture series, discussing "From Wall Street to Web3: How Will the New Chairman of the Federal Reserve Reshape the Global Financial Market?" He provided a systematic share on hot topics such as the evolution of the Federal Reserve's monetary policy paradigm, global liquidity cycles, the correlation between US stocks and Bitcoin, as well as the regulation of digital assets in the US.

Hu Jie believes that to understand future market trends, one must not only focus on interest rate cuts or hikes but also pay attention to whether the underlying paradigm of the Federal Reserve's monetary policy is changing, as this will become an important variable in global asset pricing in the coming years.

The Change in the Federal Reserve's Policy Paradigm is a Key Driver of the Global Asset Bull Market Over the Past 18 Years

Hu Jie points out that to understand the current global capital market, it is essential to grasp the fundamental changes in the Federal Reserve's monetary policy post-2008 financial crisis. He states that in the past eighteen years, the continuous rise of US stocks and global risk assets is not solely a result of improving corporate profits or technological innovations, but more importantly, the change in the Federal Reserve's monetary policy paradigm.

"After 2008, the bull market in US stocks and other financial markets is significantly attributed to the Federal Reserve's shift in monetary policy paradigm, which increasingly relies on base money issuance to regulate monetary supply. This paradigm shift has far-reaching impacts, affecting not just US stocks but also the prices of Web3 assets like Bitcoin."

Hu Jie further explains that quantitative easing has not significantly driven up long-term inflation, but it has changed the distribution structure of base money within the financial system, with a large amount of liquidity ultimately flowing into asset markets.

The New Federal Reserve Chairman May Promote Another Shift in Monetary Policy

Regarding the new Federal Reserve Chairman Kevin Warsh, Hu Jie believes his most notable characteristic is a tendency to reduce dependence on the balance sheet, suggesting that the Federal Reserve may return to a policy framework primarily centered around interest rate tools.

"With the new chairman taking office this year, it is clear that he aims to switch this paradigm. One of the most important actions is to reduce the balance sheet, which means a decrease in base money supply."

However, he thinks that the advancement of new policies will not happen overnight. Current geopolitical risks, energy prices, and inflation trends still have considerable uncertainty, and the Federal Reserve needs to balance market stability, which means that the pace of balance sheet reduction will be more cautious. "The balance sheet reduction is likely to restart, but the pace is very important. If the pace is well managed, it may not necessarily lead to huge negative effects."

Liquidity Remains an Important Variable Affecting Bitcoin

For the Web3 market, Hu Jie indicates that Bitcoin is increasingly integrated into the global financial system, with its price performance closely related to global liquidity. Particularly in the past decade, the price of Bitcoin has shown a strong positive correlation with the Nasdaq index, with a correlation degree as high as 77%. In the long term, Bitcoin is driven by macro factors similar to traditional tech stocks, such as liquidity.

He emphasizes that balance sheet reduction does not mean the bull market will end immediately, but it does mean that the asset market will lose the liquidity support it has continuously gained over the past decade.

"As a single factor, balance sheet reduction will certainly be unfavorable to any asset market, including US stocks and Bitcoin. But it is not the only factor; the development of AI, strong fundamentals, and market sentiment may continue to support asset prices."

He believes that for investors, compared to focusing daily on interest rate cut expectations, it is more worthwhile to pay long-term attention to changes in global liquidity. "Liquidity is still a bullet. Among all factors affecting asset prices, liquidity is clearly a particularly critical factor."

The Tokenization of US Stocks Will Accelerate the Integration of Wall Street and Web3

Regarding the recent rise in the tokenization of US stocks, Hu Jie believes this is an important manifestation of the deep integration of traditional finance and Web3.

"The boundaries are definitely becoming blurred. Wall Street is now entering Web3, and Web3 is increasingly linked with Wall Street; this is an inevitable trend."

He states that in the short term, the tokenization of US stocks may siphon off some funds from the crypto market, but in the long term, its true significance lies in opening the channel for traditional capital to enter the on-chain market.

However, he also cautions that RWA enhances trading efficiency, not the asset value itself. "Do not fantasize that by wrapping a bad asset with RWA, it will become a good asset. A quality asset remains a quality asset, and a poor asset remains a poor asset."

The US Digital Asset Legislation Has Global Demonstrative Significance

In conclusion, Hu Jie highlighted the digital asset regulatory legislation that the US is advancing.

He believes the CLARITY Act will certainly pass, and it won’t take long, likely passing this year. He states that the institutional construction surrounding digital assets in the US not only signifies its official establishment of a global digital finance competitive strategy but will also provide an important reference for global digital asset regulation practices, including for China.

Hu Jie thinks the future direction of digital finance development is already very clear, with major global economies continuing to explore new paths for the integration of digital assets and traditional finance, while the advancement of institutional construction in the US will further accelerate this process.

As a long-term knowledge-sharing program created by Huobi HTX, the Huobi HTX VIP Lecture series continuously invites authoritative experts from the global finance, technology, and Web3 fields to conduct in-depth sharing on cutting-edge topics such as macroeconomics, digital finance, AI, and blockchain, helping global users establish a more systematic market understanding and seize long-term investment opportunities in the complex and changing global financial environment.