Under the expectation of interest rate cuts, what is the market really betting on?

The market has been repeatedly discussing one statement lately—Trump publicly stated that a rate cut is “undoubtedly” coming, and if the Fed Chair had any intention of raising rates, they would have already been replaced. This remark has attracted attention not just because it comes from a politician, but because it reflects a market consensus that the rate cut expectation is gradually taking hold. Interestingly, despite this growing expectation of rate cuts, Bitcoin and risk assets are showing surprisingly cautious performance. Behind this contradiction lies a new understanding of the cycle, liquidity, and asset valuation.

The Fed’s Dilemma on Rate Cuts: Policy Shift Driven by Data

On the surface, the Fed’s current situation still appears under control. But from the fundamentals, high interest rates are no longer a sustainable long-term equilibrium.

Signs of slowing employment growth are becoming more evident, non-farm payrolls underperform expectations; inflation has generally retreated but remains sticky, with some components still high; more critically, the US fiscal deficit remains high, and debt levels are snowballing beyond control.

These are not new issues, but the severity lies in the fact that regardless of who is Fed Chair, a fundamental dilemma cannot be avoided: when debt levels are huge and fiscal gaps are hard to close quickly, monetary policy will ultimately have to lean toward easing.

In other words, rate cuts are not an option but an inevitability. Trump’s comments are essentially not a “prediction of the future,” but a confirmation of an already forming market consensus—high rates cannot be maintained, and a rate cut cycle will start sooner or later.

So here’s the question: why is Bitcoin still hesitant?

This is the most perplexing part. If the market is already certain that rate cuts are coming, why are risk assets led by Bitcoin not reacting immediately? Why isn’t the story of “rate cuts = rally” playing out?

The answer is simple: the market is not trading the “final outcome” now, but the uncertainty during the process leading to that outcome.

Before a true rate cut cycle arrives, there is often a phase filled with noise and reversals:

• Macro data swings unpredictably, sometimes strong, sometimes weak, sending mixed signals
• Policy expectations frequently flip—officials’ speeches switch between hawkish and dovish, requiring markets to constantly adjust
• Liquidity undergoes cyclical tightening, and market participants must navigate these fluctuations

In this process, Bitcoin is often not the “first responder” but a passively pressured risk asset. Historical lessons from multiple cycles show that Bitcoin’s true strength often emerges not during the loudest rate cut expectations, but after rate cuts are confirmed and liquidity begins to flow back substantially.

Therefore, the current phenomenon is: macro narratives are becoming increasingly “dovish,” yet market sentiment is growing more cautious. This caution is essentially preparing for the upcoming “transition period reshuffling.”

How will asset pricing logic change after rate cuts begin?

If rate cuts truly start, their specific form will determine market reactions.

If it’s a symbolic, slow rate cut, Bitcoin is likely to just experience a corrective rebound, recovering some of the previous declines, without initiating a new cycle. But if it’s a passive, continuous rate cut—meaning the Fed is forced to cut rates persistently due to worsening economic data—the logic will change dramatically.

What does passive rate cutting imply? It means real interest rates will fall rapidly, the returns on dollar-denominated assets will be compressed, and savings will become unattractive. In such an environment, “non-sovereign assets” become scarce and attractive again, and Bitcoin’s core valuation environment will improve accordingly.

However, it’s crucial to note that this cycle’s market logic is unlikely to follow the old script. Market infrastructure, participant composition, and risk asset narratives have all undergone profound changes.

The Divergence of the New Cycle: Betting on Direction Alone Is Outdated

In recent years, a notable shift in the crypto asset market has been from simply pursuing volatility to pursuing systemic qualities.

The emergence of ETFs and large institutional inflows have transformed the market from a retail playground. The expansion of stablecoins, the maturing of prediction markets, and clearer regulatory frameworks are pushing crypto assets toward more standardized, “systematic” development.

In this context, the concerns of capital have quietly shifted. It’s no longer just about “will Bitcoin go up,” but about:

Can money flow in and out of this system stably? Can settlement be low-friction? Can it be continuous?

This is why infrastructure like stablecoin ecosystems and settlement rails are becoming increasingly important. When rate cuts start and liquidity begins to return, it’s not just speculative capital entering—there will also be genuine demand for stablecoins in real use cases. Once stablecoin scale expands, the assets that benefit most are not necessarily the best storytellers, but the underlying infrastructure that facilitates transactions and settlements.

The Market Is Betting, But the Real Opportunity Might Be Underestimated

Trump’s statement ultimately confirms one fact: high interest rates are no longer the end goal. But from “rate cuts are certain” to “assets fully reverse,” there remains a long, noisy, reshuffling path.

Along this journey, simply betting on direction can be easily hurt by market sentiment swings. The truly smart capital often does two things simultaneously:

One is waiting patiently for a true cycle inflection point; the other is pre-positioning in infrastructure that must exist regardless of the cycle.

Careful observation of market trends reveals that the core competition in this round is not just “can Bitcoin rebound,” but who can become the market’s “default channel” when liquidity returns next. That is where the real long-term opportunity lies.