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Author: Juan Aranovich Source: unchainedcrypto Translation: Shan Oppa, Bitchain Vision
At the beginning of last week, the market was in tragedy.Everyone is nervous as US stocks fall and crypto markets fall sharply.A friend asked me, why does the market feel so heavy?My answer is simple:Uncertainty.
Fed Chairman Jerome Powell is scheduled to speak at Jackson Hole on Friday, but no one knows what he says.What traders hate the most is “uncertainty”.So everyone reduced their risks, sold their positions, and waited and waited.Fast forward to today, Powell’s words completely ignite the market, especially those who bet on Ethereum DeFi become big winners.
Why did Ethereum DeFi assets increase the most after Powell’s speech?
The weak job market has opened the door to rate cuts, which could attract earning investors to pour into DeFi.
Federal Reserve Chairman Powell surprised the market on Friday at Jackson Hole, hinting that the Fed will start cutting interest rates as early as September.In this highly-watched speech, Powell expressed concerns about a slowdown in the job market, even as tariffs continue to push up consumer prices.
This remark marks a clear shift in the Fed from its “anti-inflation priority” stance in the past four years, instantly igniting risky assets.Ethereum soared14% to $4800, close to a new record high.By comparison, Bitcoin only rose4%.On the prediction platform Polymarket, the probability of a 25 basis point cut in September is from60% to 80%.
Economist Alex Kruger summarized market sentiment at the time and said:“Powell’s dovish attitudeShockingly, the market is completelyUnexpectedly.”
However, in the crypto market, the assets that have the biggest increase are not BTC, but thoseAssets that generate income, or assets related to DeFi—— Especially on Ethereum.
Powell’s turn
Powell acknowledged that the balance of risks had changed.For much of this cycle, the Fed is most worried about out-of-control inflation.But now, Powell admitted that employment and growth are at risk.He described the “a strange balance” that emerged in the labor market: the supply and demand for labor are slowing simultaneously.This rare situation, he warned, could quickly evolve into a rise in layoffs and unemployment.
In his words:“The balance of risk seems to be changing.”This sentence itself is enough to excite traders, but Powell further implies that the Fed is moving away from the “average inflation target system.”The framework began in 2020 and allowed inflation to be moderately above 2% over a period of time to make up for past periods of below targets.This framework is designed for a zero-interest rate environment, and Powell admits that today’s economic environment is completely different.The Fed still targets 2% as inflation, but Powell stresses thatStable inflation expectations cannot be taken for granted.He acknowledged that tariffs are pushing up consumer prices, but downplayed concerns that this would trigger a new spiral of inflation.Translate it to:The door to rate cuts has been fully opened.
Ethereum and related assets soar
Powell is basicallyRate cuts in SeptemberClearing the way, which is usually a favorable asset for risky assets.In the hours after his speech, the crypto market exploded nearly$400 million forced draw, the bears were ruthlessly crushed.US stocks rose, but the crypto market rose even harder.
Economist Kruger quipped:“Rest in peace, those in Jackson Hole was harvested on the eve,The person who cuts his limbs at a low point.”
Although overall, the general increase in risk assets is still the largest increaseEthereum and its related tokens: ETH itself rose sharplyDouble digits,Of the 10 best-performing tokens on the day, 7 were ETH Beta (related to Ethereum) assets: MORPHO, ENA, AERO, ARB, LDO, ENS; even ETC, which has long been regarded as “dinosaur coins”, soared18%.The only non-Ethereum-related token is the emoticon coinSPX69000.
As the base camp of DeFi, Ethereum’s TVL (total locked volume) has reached$94 billion, funds are clearly flowing to Ethereum-related assets and products that can generate profits.MORPHO, AERO and Ethena have the most impressive ENA gains, with the highest20%.
Falcon Finance partner Jiang Lingling is acceptingUnchainedIn the interview, he said:“We see capital inflows Morpho (capital efficient lending), Lido (staking income), Ethena (synthetic dollar similar to savings instruments), and Aerodrome (liquidity center on Base).”
DeFi answered the question of profit
existBits + BipsOn the show, Sid Powell, co-founder of Maple Finance, explained why this happens:
“As traditional interest rates fall, the spreads and yields in crypto will be widened, and I think that will attract more money to the chain. This is very similar to 2020 and 2021, when traditional interest rates are close to zero, and lending money in crypto can get 10% or more returns.”
The lower the interest rate, the more obvious the profit advantage of DeFi is., because the gap between on-chain returns and traditional finance will be amplified, which is naturally beneficial to DeFi-related tokens.CEO of Spheron, a decentralized GPU networkPrashant MauryarightUnchainedexpress:
“Lower borrowing costs and more money entering the crypto market will amplify DeFi’s activity and make these tokens a natural beneficiary of the dovish Federal Reserve.”
ENA (Ethena’s native token, and the issuance of USDe stablecoins) has risen in the past 24 hours19%.
Ethena Labs founder Guy Young explained on X that while he admitted to being biased:
“During the last rate cut in the fourth quarter of 2024, the spread of funds interest rates relative to Treasury bonds expanded from ~0% to more than 20% in a few weeks. At that time, USDe’s supply doubled in a few weeks. If this scene reappears, we will see it in less than a monthMore than USD 20 billionsupply.Ethena is the most sensitive asset to the downside in interest rates in the world.”
The institutional level is also optimistic.DWF Labs’ Jiang LinglingUnchainedexpress:
“Capital is flowing into earnings stablecoins and tokenized treasury bonds. For many institutions, these assets are gradually becoming modern cash tools.”
Summarize
in short,Powell ignites the next risk appetite cycle.As macro headwinds weaken and institutional demand is ready, Bitcoin seems ready to turn Jackson Hole’s speech into a new tailwind.But the key question now is:Can this wave of market continue?The sustainability of this round of market depends on whether the actual interest rate can be consistent with the market interest rate and whether the impact from governance or security can be avoided.
