Cryptocurrency markets have become lively again in the past couple of days. Federal Reserve Board member Milan recently made a statement suggesting a 150 basis point rate cut this year to stimulate the labor market. Once this news broke, the entire financial circle was abuzz, and the crypto world naturally had to keep up. What does this rate cut expectation really mean for us? Today, we’ll break it down and discuss.

**The Stories Behind the Rate Cut**

The Federal Reserve is the anchor of the global financial system, with every move affecting market nerves. Milan’s comments this time are not casual; his logic is quite clear. According to his assessment, current monetary policy does have certain constraints, but inflation can be stabilized around 2.3%, which is still acceptable. The key point is that the employment market still has room—currently, about 1 million Americans are unemployed, but as long as job improvements don’t trigger runaway inflation, the central bank has room to adjust. From these statements, it’s evident that the Fed is re-evaluating its policy direction, and the door to rate cuts is gradually opening.

**The Chain Reaction of Liquidity Reversal**

Liquidity is what the crypto market cares most about. Without sufficient USD, even the best coins are useless. If the rate cut expectation actually materializes, USD liquidity globally will significantly increase. To put it another way: more money in the market, lower borrowing costs, and investors’ funds will be more willing to seek high-yield opportunities.

The significance for the crypto space is here: when yields on traditional financial assets decline due to rate cuts, high-risk, high-reward assets like Bitcoin and Ethereum naturally become new targets for return-seeking investors. Bonds become less attractive, stock gains are limited, so investors turn to crypto assets to balance risk. History shows that whenever USD liquidity is abundant, risk assets tend to rebound.

**Market Logic in Detail**

Under this round of rate cut expectations, three levels of capital might flow into the crypto space:

1. Institutional investors. Their asset allocations in traditional finance are fixed; with rate cuts, the overall return targets decrease, so they naturally seek compensation—crypto assets become a new allocation direction.

2. Retail investors following the trend. Once large funds start entering, market sentiment shifts, FOMO among retail investors ignites, and they jump in following the trend.

3. Arbitrage opportunities created by loose liquidity. Arbitrage between different markets and coins will expand, attracting quantitative traders and hedge funds.

These three forces combined are enough to drive a noticeable upward trend.

**Risks and Real-World Factors**

Of course, a rate cut doesn’t necessarily mean good news for crypto. It depends on whether the Fed will actually implement the cut and whether the 150 basis point target will be reached. If it’s just a personal suggestion from a board member without official policy change, its influence will be significantly diminished. Additionally, if inflation data repeatedly disappoints or employment figures fall short of expectations, the Fed might change its stance.

From a technical perspective, whether Bitcoin and Ethereum can effectively break through previous highs depends on trading volume and market participation. Relying solely on liquidity expectations cannot sustain a long-term bull run.

**Overall View**

This time, the Fed Board member’s rate cut proposal has indeed sent a positive signal to the crypto world. Loose liquidity is the environment crypto assets favor most, without a doubt. But how much they can rise and when the market will react depends on subsequent policy implementation and market sentiment shifts. Currently, it’s a game of expectations—those who believe the rate cut will happen are positioning early, while others are waiting for confirmation. Which camp do you belong to?