In the early morning of February 19, 2026, the latest Federal Reserve monetary policy meeting minutes were released, once again placing the already contentious interest rate trajectory at the forefront of debate. The minutes were collectively issued by the FOMC decision-making body, clearly revealing internal divisions on the future direction of interest rates: some officials prefer a gradual rate cut as inflation continues to decline, while others clearly advocate for a wait-and-see approach or even a more hawkish stance. What further strained market nerves was a statement interpreted by a single source as the “first mention of a discussion on the possibility of interest rate hikes,” which quickly became the focus of traders. With inflation yet to fully return below target, the dovish calls for accelerated rate cuts collided with hawkish voices warning of a resurgence in inflation and even the possibility of further rate hikes. The truly unresolved issue is: how will these minutes reshape the market’s perception of the 2026 rate cut pace and rewrite the narrative of global asset prices, including cryptocurrencies?
On the Night of the Release: Rate Cut Bets Dispersed and Reordered
● Prior to the release of the minutes, the market generally bet on multiple rate cuts within the year based on macro guidance from the beginning of the year, harboring a fairly optimistic view of the resumption of the easing cycle. Against a backdrop of gradually falling inflation and no significant drop in growth, risk asset sentiment leaned overwhelmingly positive, with interest rate futures and various asset pricing implying a “smooth, multiple, and predictable” rate cut path. Traders focused more on betting on the timing rather than questioning the direction.
● After the release of the minutes, a key piece of information was that multiple officials explicitly stated their support for further rate cuts as inflation continues to drop, but at the same time, there were also officials who maintained a clear caution regarding rate cuts, emphasizing the need for more data to confirm progress on inflation and economic resilience. This tone of “supporting rate cuts but retaining flexibility” broke the prior market imagination of internal consensus, revealing that the decision-making body had not locked into a single easing route but was repeatedly reflecting on a more complex trade-off.
● The market's most sensitive trigger point came from the phrasing interpreted by outsiders as “the first mention of discussions on the possibility of interest rate hikes” — although this statement was based on a single source and the specific expression still requires further verification, it quickly gained traction in the trader community. Social media and market commentary amplified this clue into a “hawkish turning point signal,” gaining weight on an emotional level that far exceeded the text itself, leading many quantitative and macro players to temporarily lower their exposure to the easing path.
● The emotional shift that night was clearly visible: before the minutes, the market seemed to be solely yearning for “accelerated easing,” whereas after the minutes, the main tone was forced to shift to “policy uncertainty returning.” Expectations of a longer-term higher rate center and fewer rate cuts began to permeate, with risk assets being forced out of the “smooth easing” script and reassessing the true elasticity of the interest rate path as it swings with data.
Dovish Bets Against Hawkish Warnings: The Dilemma Under Inflation's Shadow
● The current macro backdrop can be roughly summarized as follows: the market consensus believes that inflation is still about 1 percentage point above the 2% target, a judgment that falls into a range that needs to be validated rather than recent official terminal data. In other words, inflation has clearly deviated from its high, but there is still a gap from the “safe zone” in the minds of policymakers; this vague state of “not yet fully controlled” provides fertile ground for policy divergence and intensifies debate over the future path.
● The starting point for dovish views is: under the expectation of a gradual decline in inflation, the opportunity to moderately cut rates during this window should not be missed. In their view, maintaining high rates for too long will suppress investment and consumption, erode the elasticity of the labor market, and increase the probability of a hard economic landing. Through rhythmical rate cuts, a buffer can be provided for growth and the labor market, allowing the economy to return to normalcy more smoothly, rather than being passively and hastily eased significantly after data deteriorates significantly.
● The hawkish camp, on the other hand, is more concerned about the tail risk of inflation re-emerging. They fear that if policy shifts too early from a tightening environment to a loose one, it may replay similar misjudgments and passive catch-up seen before the aggressive rate hike cycle in 2024: once inflation rises again, future rate hikes will have to be implemented from a higher starting point with more intensity. These officials tend to prefer to “hold off a bit longer” in the current relatively high-rate environment, and even believe it's necessary to discuss rate hike options in extreme scenarios to ensure risk management tools remain intact.
● From a higher level, this tug-of-war is not merely a simple “easing vs tightening,” but rather a balance between the risks of “preventing recession” and “preventing resurgence”. One side faces the downside risk of growth and employment, while the other side faces the upside risk of inflation reigniting; the decision-making body reviews both ends back and forth, forming seemingly ambiguous but highly cautious wording in the minutes, while laying the groundwork for subsequent market long-short dynamics regarding the interest rate path.
Trading Desk Rapidly Reprices: From 3 to 1 in Expected Cuts
● At the beginning of the year, mainstream market expectations once believed that three to four rate cuts could occur in 2026, a trajectory that also belongs to a range of derivative pricing consensus needing verification rather than an official commitment. With repeated macro data and the divergent signals released in this set of minutes, this expectation has been significantly revised down to a more conservative range of one to two rate cuts. The contraction of expectations itself represents an invisible tightening: even if nominal rates remain unchanged, the market’s discounted value of future easing has been reduced.
● Correspondingly, the claim circulating in the market that “the probability of a March rate cut has dropped to single digits” serves more as an emotional indicator rather than precise authoritative pricing. Such expressions indicate traders have significantly lowered their bets on near-term easing, shifting attention from “when will consecutive rate cuts begin” to “is there enough space this year to initiate rate cuts.” After the minutes, the optimistic premium at the short end was quickly squeezed, forcing the timeline for imagined paths to be pushed back.
● In the interest rate futures and bond markets, while specific points still need to be dismantled through professional tools, the directional logic is relatively clear: the front end of the yield curve is retracting pricing for rate cuts, while the long end is becoming increasingly concerned about neutral rate increases. For risk assets, this means the imagined “rapid drop” of the risk-free return rate has been corrected, diminishing the valuation support relied upon by equities and high-volatility assets, making prices increasingly sensitive to any hints of “higher rates for longer.”
● From a more abstract perspective, this round of repricing resembles a shift from “dreams back to mathematics”: the story built around multiple rate cuts has been redefined by the minutes, forcing the market to compress its imagined easing into the narrow confines permitted by the text. Trading desks no longer see rate cuts as a linear, predictable path, but rather as a conditional event swaying continuously with data and internal competition, where every change in wording in the next few meetings could trigger a new round of valuation adjustments.
A Single Mention of Rate Hike Discussion Disturbs the Market: The Cost of Overinterpretation
● The core ignitor of this round of emotional fluctuations is the external capture and amplification of the “first appearance of rate hike discussion” in the minutes—it's important to emphasize that this statement currently originates from a second-hand interpretation from a single channel and is still in a verification state. There is always space for information loss and reprocessing between the original text and interpretations, but in the public discourse, it is often simplified into a concise and powerful conclusion that becomes the main axis of market narrative.
● Comments like “this is the most hawkish signal since the aggressive rate hike cycle” have been widely shared on social media, reflecting market sentiment more than official judgment. Such voices reinforce the imagination of “the Federal Reserve is ready to restart rate hikes at any time,” providing narrative support for some short positions or defensive funds, and leading cautious investors to choose to “reduce positions first, verify later” in the absence of more details. Sentiment layers upon itself through retelling and quoting, far exceeding the original information volume.
● From an institutional operational perspective, the mere appearance of rate hike discussions in the minutes does not mean that a rate hike path has been formed. A more reasonable understanding is that under the risk management framework, decision-makers will periodically review and update all potential options, including tightening plans in extreme scenarios. Incorporating this into the discussion is part of toolbox maintenance, rather than forecasting a specific timeline for action. However, when this plan is taken out of context and presented separately, it easily gets read as a directional signal.
● The key question now is: is the market treating a “potentially mentioned option” as “an imminent path”? If the answer is yes, then during this interim period before information is fully verified, what prices reflect is not the Federal Reserve's true policy inclination but rather a premature bet on a narrative that is still uncertain. Mispricing could potentially amplify spreads and volatility in the short term, while more official communication and data releases later might force these excessive reactions to gradually unwind.
How Will Cryptocurrency Assets React: A Fine-Tuning of the Liquidity Narrative
● Before the minutes, the cryptocurrency market largely constructed a liquidity-friendly narrative around “multiple rate cuts + long-term easing”: high rates would gradually exit, funding costs would decline, and overall risk appetite would rise, providing valuation imagination for high-volatility, high-growth stories. Due to extreme sensitivity to global liquidity, cryptocurrency assets often view the Fed’s path as one of the core macro anchors, tightly linking their endogenous volatility to external policy expectations.
● When expectations for rate cuts are downshifted from “3-4 times” to “1-2 times,” alongside the emergence of news on “rate hike discussions,” the positioning of funds on the risk curve will naturally adjust. Some funds originally willing to take on high beta exposure may shift their allocations to assets with more certain returns and more attractive nominal yields, placing marginal pressure on high-volatility cryptocurrency assets from redemptions or portfolio shifts. This inflow is not a panic withdrawal but a passive response to “higher risk-free returns being maintained for longer.”
● It’s important to see that behind short-term price fluctuations, what is being repriced is more akin to the “real interest rate levels” and “overall risk appetite”, rather than just one meeting. What a single set of minutes can change is the emotional range and expected distribution, but it is difficult for it to single-handedly overturn an entire macro cycle. For participants, emotional trading based on fragmented interpretations often means exchanging clarity of direction for the highest volatility costs at the noisiest moments.
● From an operational standpoint, a more robust approach is to view these minutes as a narrative revision, rather than a final conclusion: easing may still occur, but the rhythm, magnitude, and conditions are harsher than previously imagined. For the cryptocurrency market, this means needing greater flexibility in valuation and position management to leave space for subsequent policy and data battles, rather than betting on the wording of any single meeting determining the liquidity trajectory for the next two years.
The Interest Rate Path is Not Finished: Finding a Coordinate System Amid Disagreement
The core information revealed by the minutes is that there is a substantive divide in the decision-making body regarding the pace of rate cuts and whether to retain or even discuss the option of rate hikes, with market uncertainty over interest rate paths being repriced. Many key statements, especially those regarding the “first discussion of rate hikes,” stem from second-hand information awaiting verification and public amplification effects, so readers must consciously distinguish the level differences between the official minutes text and social media interpretations when reading various comments to avoid misinterpreting emotional samples as authoritative signals.
In the medium to short-term judgment framework, the future adjustments to expectations for the number of rate cuts in 2026 will hinge on the convergence of three main lines: firstly, whether inflation trends can stabilize near the 2% target; secondly, whether employment and growth resilience show any turning points; and thirdly, how the forward-looking communication in upcoming meetings and public speeches guides the market to reset paths. Every round of data and statements will rebalance the weights of “preventing recession” and “preventing resurgence” among these three main lines, leaving traces in derivatives and asset prices.
Returning to the cryptocurrency market, what is truly worth focusing on may not be speculating on the result of the next meeting, but rather building a personal “emotional range and valuation range coordinate system” on the repeatedly swinging policy expectations: being wary of overextension in valuations during extremely optimistic expectations, and recognizing whether risk compensation is sufficient during extremely pessimistic times, rather than swinging violently with every nuanced statement from each set of minutes. In a cycle where the interest rate story is not yet complete, narratives will repeatedly morph, but the discipline and framework of asset pricing must be clearly defined first.
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