The crossroads under the shadow of cooling inflation and tariffs: How the Federal Reserve's interest rate cut game reshapes the crypto market landscape.

Source: Cointelegraph Original Text: "Crossroads Under Cooling Inflation and Tariff Shadows: How the Federal Reserve's Interest Rate Cuts Reshape the Crypto Market Landscape"

The Collision of Data and Politics - A Silent Battle Affecting Global Capital

On May 13, 2025, the U.S. Department of Labor released the CPI data for April, which served as a shot in the arm, bringing the annual rate down to 2.3%, the lowest since February 2021, while core inflation remained stable at 2.8%. This data instantly ignited the market's fervent expectations for an interest rate cut by the Federal Reserve, but at the same time, Trump's tariff policy and his pressure on the Federal Reserve cast a shadow over this "interest rate cut frenzy." Will the brief respite in inflation be enough to reverse the hawkish tone of monetary policy? Can the crypto market capture structural opportunities in this tug-of-war between bulls and bears?

1. Inflation Cooling: The Hidden Concerns Behind Rising Expectations for Interest Rate Cuts

The key to the April CPI data lies in the weakness of the commodity price components: the decline in energy costs and the recovery of supply chains led to a mere 0.1% month-on-month increase in core goods inflation, while inflation in the service sector, although slowing, remains sticky (such as in healthcare and housing costs). This divergence confirms the Federal Reserve's concerns—despite the overall decline in inflation, a tight labor market and the rigid demand in the service sector may make the "last mile" of inflation difficult to tame.

The market response shows polarization:

This divergence stems from a key paradox: the questionable sustainability of data improvements. Trump's tariff policy launched in February has begun to push up the prices of clothing and electronics, and the transmission effect of tariffs on inflation may be concentrated in the third quarter after the retailer's inventory digestion cycle is over. If inflation rebounds again, the Fed may be forced to maintain a "higher and longer" interest rate stance, triggering a sharp correction in the market.

2. Trump's "Double Game": Tariff Truce and Political Pressure

Trump has been frequently sending contradictory signals recently: on one hand, the China-U.S. Geneva talks reached a temporary tariff reduction agreement (cutting tariffs on China from 145% to 30%), which briefly alleviated global supply chain pressures; on the other hand, he publicly criticized the Federal Reserve for being "slow to act," demanding "immediate interest rate cuts to save the stock market." This strategy aims to boost short-term market sentiment to gain voter support, yet it exacerbates policy uncertainty.

The "lag effect" of tariff policy has become a key variable:

This policy oscillation not only disrupts corporate investment decisions but may also trigger "stress-induced fluctuations" in the capital markets - for instance, in early May, ahead of the OPEC+ production meeting and the G7 finance ministers' meeting, Bitcoin's daily volatility surged to 8%.

3. Crypto Market: Finding Alpha Amid Policy Fractures

The complexity of the macro environment brings a bidirectional driving logic for crypto assets:

However, the cryptocurrency market also faces structural risks:

Strategy suggestion: During the window period between the June Federal Reserve meeting and the July non-farm payroll data, adopt an options collar strategy to hedge tail risks, while increasing allocation to tokens that are strongly correlated with AI computing power demand (such as Render Network), in order to capture the dividends of computing infrastructure expansion.

Conclusion: The Fragile Balance and the Restlessness of Capital

The current market is at a subtle balance point between "data optimism" and "policy risk." Every decision made by the Federal Reserve not only concerns the trade-off between inflation and employment but also is a tightrope game between political pressure and market expectations. For crypto investors, this is both an opportunity and a trap—only by penetrating the short-term noise and focusing on the "second derivative changes" of interest rate paths and geopolitical policies can one anchor value amid volatility. As a hedge fund manager put it: "The winner in 2025 will not be the one chasing data, but the one decoding policy fractures."