Recently, the Fed's policy direction has undergone a significant shift, attracting widespread follow in the market. Although on the surface, a 4% unemployment rate seems to indicate a stable job market, the actual situation may not be so optimistic. The contraction in labor supply due to reduced immigration raises concerns about the robustness of the job market.

What is even more concerning is the issue of inflation. Tariffs have already pushed up price levels, and the core PCE continues to hover in the range of 2.5%-3%. The most troublesome is the potential occurrence of "expectation-driven second-round inflation," where the public's expectations of rising prices could become a self-fulfilling prophecy.

In the face of this complex situation, the Fed's policy choices have become extremely difficult. The interest rate hike cycle has ended, and the current policy interest rate of 3.5%-4% is considered to have reached a neutral level. Fed Chairman Powell seems to have abandoned the average inflation targeting (AIT) adopted in 2020 and has instead adopted an "expectations management" strategy. However, to initiate interest rate cuts, it may be necessary to wait for a substantial deterioration in employment data, such as extreme situations where non-farm payrolls fall below 100,000.

For participants in the cryptocurrency market, it is crucial to closely follow two key indicators: the non-farm payroll report released every Friday and the core PCE data. If the number of new jobs falls below 100,000, it may trigger strong expectations for interest rate cuts, which could significantly drive up Bitcoin prices. Similarly, if the core PCE continues to decline, it will also create room for the Fed to cut rates, which is beneficial for the crypto market.

In addition, the Fed's policy shift will have widespread effects on other markets. The dollar may be under pressure due to a worsening job market; in the stock market, consumer stocks may face risks, while defensive sectors such as utilities may perform more steadily; in the bond market, the yield on 10-year treasuries may fluctuate in the range of 4%-4.5%, marking the end of the long era of low interest rates.

Overall, the cryptocurrency market is waiting for signals from the Fed regarding interest rate cuts, which mainly depend on the performance of employment and inflation data. Investors need to stay alert and closely monitor changes in these economic indicators to timely adjust their investment strategies.