Federal Reserve "Pause or Continue" Remains a Mystery; How Will the Crypto Market Thrive Under Japan's Rate Cut Expectations?

Disconnection of Central Bank Policies: Federal Reserve Wavers, Japan Accelerates Rate Cuts

The Federal Reserve’s policy signals have suddenly become extremely ambiguous. The September non-farm payrolls added 119,000 jobs, exceeding expectations, but the unemployment rate rose to 4.4%, reaching a new high since 2021—this mixed “good and bad” signal directly disrupted market expectations for a rate hike in December. The 70% probability of a rate cut initially dropped to 30%, then fluctuated between 30% and 70%, with Wall Street and traders waiting for a clear direction.

In stark contrast, Japan’s policy stance is clear. The Japanese government just approved a stimulus package of approximately ¥21.3 trillion, while policymakers repeatedly hinted that the era of negative real interest rates is nearing its end, and the likelihood of rate cuts in Japan is gradually increasing. This means the fiscal sector is still flooding the market with money, while the central bank is preparing to tighten gradually—Japan itself is caught in a policy internal contradiction.

Internal Divisions within the Federal Reserve: The Real Tug-of-War Between Doves and Hawks

Disagreements within the FOMC have become public. Dovish officials continue to argue that “current monetary policy remains too tight, the economy still faces downside risks, and rate cuts should continue”; hawks warn that “asset prices are showing signs of a bubble driven by AI narratives and algorithmic trading, and large rate cuts would be like pouring gasoline on the fire.”

Recent statements from officials in the Philadelphia, Chicago, and other regional Fed banks all point to the same concern: current market valuations have diverged from fundamentals, and further easing could push financial risks to a critical point. This is not alarmism—assets with high valuations often become the fuse for “bubble bursts” during rapid rate cut cycles.

How Macroeconomic Storms Impact the Crypto Market

Market Pricing Disconnection

Uncertainty in Fed policies directly transmits to financial markets: the dollar, interest rate expectations, and volatility indices are all swinging wildly. For the crypto market, this means high-beta assets like BTC and ETH will be the first to react, serving as barometers of risk sentiment.

Key Technical Levels

According to the latest data, BTC is currently at $86.47K, down 0.20% in 24 hours, repeatedly battling in the $80K-$82K range. This zone is the “sentiment defense level” for this rally—if broken, the market could shift from a “normal correction” to a “series of liquidations.”

ETH is at $2.84K, down 0.50% in 24 hours, oscillating near the $2.8K level. Resistance is at $3000-$3200, support at $2600-$2650. Compared to BTC’s resilience, ETH’s performance appears more fragile, reflecting cautious market attitudes toward smart contract assets.

Trader Survival Rules: Living Is More Important Than Making Money

In an environment where central bank policies are conflicting, risk control is absolutely paramount.

Step 1: Reduce Leverage

Leverage should be scaled down to a level where you can sleep peacefully. Especially for over-leveraged contracts and dual-direction high-leverage positions, prioritize trimming the most correlated and volatile positions. This is not conservatism but rationality—any pursuit of high ROI ahead of policy nodes is essentially gambling.

Step 2: Control Exposure, Not Just Single Positions

Estimate true risk exposure roughly by “holding value × leverage.” During macro volatility phases, exposure should be reduced to 50%-70% of normal. Many traders err by focusing only on the gains or losses of a single position, ignoring the systemic risk of their entire portfolio during market swings.

Step 3: Keep Powder Dry for Black Swans

December features multiple key events: Fed rate decisions, Bank of Japan meetings, Powell’s speeches, etc. Reserve 40%-60% in cash or stablecoins to respond to these events. Many have missed subsequent rebounds because they were forced to liquidate at critical moments—something entirely avoidable.

Step 4: Adjust Operation Rhythm Around Event Dates

48 hours before major data releases or rate decisions: actively reduce positions, lower leverage, shorten holding periods; after the event: wait for clear direction before following or reversing trades, always prioritizing risk management.

Two Major Scenarios for December

Scenario A: Fed Maintains Dovish Stance

If December continues to cut rates or signals dovishness, the dollar will weaken, interest rate expectations will decline, and risk assets will have a “rebound opportunity.” The rotation order for high-beta assets typically starts with BTC leading, then ETH, and finally smaller coins. The strategy should be “buy on dips” rather than chasing highs, with predefined key entry zones for phased accumulation.

Scenario B: Policy Hits Pause

If hawkish signals or pause hints are released, US Treasury yields will rise, the dollar will strengthen, primarily impacting long-duration assets and high-leverage speculative positions. The response should be: if key supports are broken, prefer to be flat or lightly positioned, avoiding fighting macro trends. The best hedge for retail traders is to simply reduce positions.

Final Trading Philosophy

When global central banks fall into policy “schizophrenia,” pessimists often gain short-term psychological superiority in macro judgment, but the real winners are those who stay calm, maintain strict discipline, and are willing to slowly add to positions when others panic.

History repeatedly proves: turning points in policy shifts are often the best trading periods of the year. This is such a moment—what matters is not “how to predict,” but “how to prepare.”