On January 14, 2026, at 8:00 AM UTC+8, Federal Reserve Governor Stephen Milan, in a public speech in Athens, directly linked "regulatory easing" with "future interest rate cuts," prompting the market to rapidly amplify interpretations. He suggested that if about 30% of regulatory restrictions could be reduced in the coming years, it would create downward pressure on prices, thereby creating new space for monetary policy easing. Simultaneously, on-chain and derivatives data provided a stark contrast: on one side, a giant whale raised approximately $351 million in long positions at a critical moment, while on the other side, about $693 million in contracts were liquidated across the network in the past 24 hours. The assumption of reduced regulatory constraints, the whale's increased bets, and the passive exit of high-leverage funds intertwined, leading the market to question not just the next interest rate meeting, but how regulatory easing would reshape the Federal Reserve's interest rate path over a longer cycle, and how this would be transmitted through the asset pricing chain to both traditional and crypto markets.

Athens Statement and the New Framework of Regulatory Integration into Monetary Policy

In his speech in Athens, Milan did not adhere to the traditional technical discourse surrounding inflation and employment data, but instead proactively directed the topic towards the regulatory structure itself. He emphasized that if about 30% of regulatory restrictions could be eliminated by around 2030, the compliance costs for businesses and financial institutions would significantly decrease, resource allocation efficiency would improve, and overall price levels would thus face clearer downward pressure. This logic of "regulation guiding prices" was directly described by him as an important groundwork for future easing cycles—when the reduction of regulatory burdens translates into medium- to long-term deflationary forces, the Federal Reserve could find new theoretical justifications and communication tools for interest rate cuts without sacrificing credibility. Milan's statements effectively incorporate regulatory efficiency into the monetary policy toolbox, embedding what originally belonged to structural reform topics into the expectations management of interest rate decisions. Compared to the previous framework that solely revolved around inflation targets and employment gaps, his choice to approach from regulatory efficiency means that there is now an additional narrative path of "first adjusting institutional friction, then adjusting interest rate levels" in official discourse. This path lays a linguistic and logical buffer for future scenarios where inflation data remains stubbornly high, but structural price pressures decline, allowing for continued advancement of interest rate cut expectations.

The Collision Scene of Deflationary Effects and Dual Missions

If regulation is viewed as an "implicit tax burden" on economic operations, then reducing constraints and improving efficiency will logically push towards deflationary effects through two main lines: first, the decrease in corporate compliance and financing costs lowers the marginal cost of unit output, ultimately reflected in a gradual decline in the prices of goods and services; second, reduced friction in financial intermediation allows for smoother flows of credit and capital between industries, with intensified competition suppressing pricing power in certain sectors. This medium- to long-term deflationary pressure brought about by structural improvements creates new friction with the Federal Reserve's dual mandate of "maximum employment and price stability." On one hand, the latest estimates of neutral interest rates and slowing housing inflation provide a traditional basis for policy easing—indicating that the economy is not significantly overheating and that some price components are already showing signs of fatigue; on the other hand, if the improvement in regulatory efficiency further lowers price growth, the Federal Reserve will be pushed towards a lower equilibrium interest rate level while maintaining full employment. In this setting, the conditions that truly trigger a rate cut cycle are no longer just inflation falling back to target ranges, but rather the combination of price declines, the labor market not experiencing a hard landing, and manageable financial stability risks. When inflation is passively lowered due to regulatory efficiency, decision-makers must weigh the trade-offs between lower interest rates and financial fragility, transforming the question of "when and by how much to initiate rate cuts" from a relatively data-driven issue into a more politically and economically colored choice.

Market Betting Direction from Wall Street Positions

In stark contrast to Milan's speech, large funds quickly positioned themselves in the derivatives market. Multiple data sources indicate that one or a few leading participants raised approximately $351 million in long positions shortly before and after the statement, clearly betting that risk assets would encounter a more favorable interest rate environment in the near future. Such whale positions are often built on medium- to long-term judgments about policy direction rather than short-term emotional fluctuations. Meanwhile, the data showing that about $693 million in contracts were liquidated across the network in the past 24 hours paints a grim reality on the other end: a large number of high-leverage positions were passively liquidated amid the oscillation of misaligned regulatory and interest rate expectations. Regulatory easing is interpreted as a prelude to expectations of falling interest rates, but the macroeconomic and policy implementation itself is fraught with uncertainty, leading to both long and short positions gambling around the same logic but across different time dimensions. Whales tend to quietly build positions before expected turning points, waiting for policy signals and market sentiment to resonate again; while high-leverage contracts dominated by retail and small funds are frequently forced out amid amplified short-term volatility. The rhythm mismatch between massive long positions and liquidation creates a situation where the transmission of interest rate direction from the macro level to cryptocurrency prices is further amplified by rounds of passive liquidations, forming a cyclical chain of "expectation—position reconstruction—volatility intensification—repricing."

The Fear of Local Banks and the Shadow of Yield Temptation

Outside the new framework of regulation and interest rate cuts depicted by Milan, local financial institutions are becoming increasingly sensitive to another line of risk. Regulatory official Kevin Paintner publicly warned that allowing yield-incentivized crypto intermediary products to expand under a more relaxed framework would pose significant risks to local economies. These products, centered around high-yield narratives, directly siphon deposits from community banks facing slowing deposit growth and rising asset-liability mismatch pressures. Community banks, already caught between expectations of falling interest rates and the imagination of regulatory easing, must confront the reality of compressed yields in traditional business while watching yield-bearing crypto products compete for the same risk-averse customers without clear compliance boundaries. Under this dual pressure, their asset side is more easily induced to migrate towards high-yield, high-volatility assets, while the liability side faces additional tests of liquidity stability. If regulators push for efficiency improvements and reductions in constraints too quickly in the coming years, while the macroeconomic environment is in a downward cycle, local financial institutions may simultaneously face pressure on both credit and liquidity fronts. Once high-yield products encounter payment issues or severe price fluctuations, funds will withdraw from community banks, leading to a sudden halt in financing for small and micro enterprises and households in the local economy, and this chain reaction will further amplify the already fragile regional economic fluctuations.

The Imagination Boundaries of Rate Cut Expectations and Policy Games

Even though Milan released a clear signal in Athens of "first easing regulation, then creating space for rate cuts," the current public information is still insufficient to deduce any specific timeline or magnitude for rate cuts. His statements are more about expanding the logical boundaries of the Federal Reserve's communication, reserving theoretical space for future easing even when certain data do not fully align. Meaningful judgments can only be constructed around the logical sequence of the speech and the consistency of subsequent statements to build probability ranges. A potential line of debate is emerging between monetary authorities and political levels: technically, some governors may prefer to first promote regulatory efficiency improvements and then have more substantial reasons to cut rates when inflationary pressures ease; however, from a political and electoral incentive perspective, some forces may prefer to see nominal interest rates lowered directly to alleviate interest burdens and asset price pressures. This divergence of "whether to adjust the system first or to act on prices first" reflects different understandings of tolerance for financial stability and the weight of growth targets. Given the current macro data and market position structures, multiple scenario lines can be imagined: if inflation continues to be suppressed by housing and regulatory efficiency factors while employment remains resilient, the Federal Reserve may gradually lower policy rates over the next few years, leading to an upward shift in risk asset valuations; if inflation stickiness exceeds expectations but the pace of regulatory easing advances first, the market may oscillate for a longer time in a combination of "high interest rates + higher risk appetite," with the correlation between interest rates and asset prices temporarily weakening; and in a scenario of significant growth slowdown and rising local financial risks, decision-makers may be forced to simultaneously employ both regulatory and interest rate tools in a short time, leading to more severe asset revaluations.

From a Hint to a New Rate Hike Path

From the statement made in Athens on January 14, 2026, "regulatory easing will bring downward pressure on prices, providing reasons for rate cuts," Milan effectively completed a nested discourse action: forcibly incorporating the regulatory topic, which was originally independent of monetary policy, into the analytical framework of interest rate decisions, compelling the market to add "regulatory efficiency" as a dimension when assessing future paths. From then on, in addition to inflation, employment, and neutral interest rates, the extent and pace of regulatory constraints being reduced will also become an implicit variable in the outlook for capital pricing. Accompanying this shift in discourse are the $351 million long positions raised by whales in the derivatives market, the $693 million in contracts liquidated across the network within 24 hours, and the vigilance of community banks towards yield-bearing crypto products. These seemingly disparate fragments collectively piece together a picture of a multi-faceted game: policymakers seeking a new balance between regulation and interest rates, large funds positioning themselves ahead of the noise, and small to medium institutions caught between the temptations of yield and fears of risk. For investors in the coming years, focusing solely on inflation or interest rates is becoming insufficient. The evolution of regulatory efficiency will determine the strength of structural deflationary forces, changes in the inflation path will shape the space for nominal and real interest rates, and these two factors intertwine with the market's subjective expectations of rate cuts, collectively shaping the valuation ranges of traditional and crypto assets. Those who can identify the deviations between narrative and reality earlier in this intertwining process will have a better chance of gaining an advantage in the next round of dual repricing of interest rates and regulation.

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