The Federal Reserve just poured cold water on the market. At the start of the new year, interest rates were firmly pegged at 3.50%-3.75%. Yesterday, there was hope for easing, but today they have been repriced. In 2026, where is the market headed?

From the December dot plot, officials are likely to cut only 25 basis points throughout the year, with the final rate around 3.4%. This is not just a rate cut, but more like a "rate adjustment"—economic data is in front of us: inflation sticking at 2.4%, GDP growth surging to 2.3%. Against this backdrop, what gives the Fed the urgency to loosen policy?

Wall Street's expectations for rate cuts in 2026 have completely split. Goldman Sachs and Morgan Stanley remain relatively optimistic, betting on a 50 basis point cut in March and June each. JPMorgan is more conservative, betting on only one rate cut. The extremes are more exaggerated—some are shouting "zero rate cuts," while others dream of a significant 150 basis point decrease. The divergence is almost absurd.

A more critical variable is that Powell might step down in May, with his successor possibly being the dovish Haskett. If that happens, the entire script could be rewritten.

But reality isn't so romantic. Unless the unemployment rate suddenly spikes above 4.7% or inflation drops back to 2% instantly, the Fed will only "squeeze toothpaste" to cut rates gradually. Moody's prediction of a 75 basis point cut is wishful thinking—inflation remains sticky, and the economy is resilient.

However, there's a signal worth noting: the Fed injected $74.6 billion of liquidity into the banking system late at night, reaching a new high since the pandemic. Despite seasonal factors at year-end, such a massive injection is not ordinary. Historical experience tells us that once the liquidity faucet truly opens, risk assets tend to lead the charge. Cryptocurrency investors should pay attention to this trend.