In the Eastern Eight Time Zone this week, the divergence surrounding the future interest rate path of the Federal Reserve has sharply intensified on Wall Street: on one side, the Deutsche Bank team emphasizes that current rates are nearing the "upper end of the neutral rate range," while on the other side, asset management institutions like Global X continuously remind the market that real rates remain relatively tight, which may force the Fed to passively cut rates again. The concept of the neutral rate, which was originally somewhat academic, has been pushed to the center of public discourse, amplifying policy uncertainty. Meanwhile, against the backdrop of a weakening dollar and a significant weakening of Bitcoin's correlation, the traditional narrative of "weak dollar strong Bitcoin" is beginning to falter, leaving the crypto market increasingly bewildered amid the fog of interest rates and misaligned correlations.
The Neutral Rate Debate: Cracks Opening Within Wall Street
● Deutsche Bank's Judgment: Deutsche Bank economist Christoph Balz publicly stated, "Current interest rates are closer to the upper end of the neutral rate range," which means that within their framework, the Fed has roughly completed the transition from tightening to a balance point that "neither significantly suppresses growth nor excessively stimulates the economy." For traditional banks like Deutsche Bank, which focus on corporate credit and foreign exchange, a too-rapid return to easing could reignite inflation and asset bubbles, so they prefer to view current rates as a high-end neutral level that can be "maintained for a period of time."
● Global X's Rebuttal: In stark contrast, Scott Helfstein from Global X emphasized, "High real rates may force the Fed to cut rates again soon," a judgment that remains a conclusion to be verified, but has sparked widespread discussion within institutional circles. From an asset management perspective, persistently high real rates compress the valuation space for stocks, bonds, and risk assets, also suppressing the willingness to allocate funds to growth and crypto assets, making them inherently more sensitive to the question of "whether rates are already too tight."
● The Core Position of the Neutral Rate: In this round of debate, the reason "neutral rate" has become a focal point is that it is seen as an invisible yardstick for assessing current policy orientation: if the policy rate is above the market-recognized neutral level, it indicates a tight monetary stance, and vice versa. The problem is that there is a huge estimation range for the neutral rate itself, and differences in models, parameters, and risk preferences among different institutions directly evolve into opposing bets on the future interest rate path, amplifying the market's perception of the divergence over "whether the Fed has already reached its target or is still excessively tightening."
From Dollar Anchor to Sentiment Anchor: The Traditional Bitcoin Narrative is Shifting
● A Singular Observation of Decoupling: JPMorgan pointed out in its latest research that while the dollar index has weakened in phases, it has not correspondingly led to a strong performance from Bitcoin, indicating a clear decoupling of the traditional "weak dollar = Bitcoin up" chain. It is important to emphasize that this judgment is still a single-source observation and has not yet been fully verified in broader quantitative research, but for participants who have long relied on the dollar's movements to construct crypto trading frameworks, this signal is already unsettling.
● Divergence Between Traditional Narratives and Reality: In past cycles, a weakening dollar often accompanied a warming of global liquidity and an increase in risk appetite, with Bitcoin, as a speculative and hedging asset "outside the dollar system," often gaining valuation premiums during this phase. This narrative has even been simplified in the eyes of quantitative funds to a "short dollar, long Bitcoin" hedging strategy. However, in the current environment, even with the dollar under pressure, Bitcoin's price has not formed a symmetrical strength, indicating that a single exchange rate factor is insufficient to explain price fluctuations, and the simple correlation logic that macro traders rely on is failing.
● Emotional Transmission of Rate Expectations: The back-and-forth swings in rate expectations resemble a transmission through "confidence and risk appetite" rather than a "single exchange rate channel" to the crypto market. When the market believes the Fed will maintain tight rates for longer, funds tend to flow back to high-quality government bonds and dollar assets, weakening allocations to high-volatility crypto assets; once rate cut expectations arise, short-term funds quickly attempt to bottom-fish. Bitcoin is no longer just passively following the dollar index but is packaged into a "basket of macro risk assets," with its price reflecting more subjective expectations about future liquidity and regulatory environments rather than a simple dollar mirror.
The Crypto World in the Fog of Interest Rates: Asset Bubbles and Shadows Coexist
● The Data Background of Regulatory Shadows: Blockchain analysis firm TRM Labs estimates that illegal crypto trading could reach approximately $158 billion by 2025, a figure that is also a single-source estimate, but is sufficient to provide a strong rationale for tightening global regulation. Regardless of the accuracy of the data, such a volume of "gray flow" reinforces the stereotype of "crypto = compliance vacuum," making policymakers more inclined to maintain a cautious or even defensive posture regarding the crypto sector when considering easing financial conditions.
● Heightened Global Regulatory Atmosphere: The Chinese regulatory authorities continue to strengthen the crackdown on violations and abnormal trading behaviors in the capital markets. Although no detailed provisions have been given specifically for crypto assets, the signals released are very clear: a closer examination will be applied to high-volatility financial instruments and narratives that are prone to abuse. This global resonance of tightening regulation systematically weakens the narrative of "borderless and high freedom" in crypto, marginally suppressing the potential valuation elasticity of assets like Bitcoin during phases of easing expectations.
● The Fragile Side of Security and Trust: The co-founder of hardware wallet manufacturer Ledger encountered a security incident, leading to an investigation by the French special police force GIGN. This sudden event once again exposed the industry's "last mile" security and trust issues to the spotlight. Although the specific technical attack paths and personal privacy details have not been disclosed, for an industry centered on the narrative of "decentralization," any security incident involving core figures and key infrastructure will heighten regulatory and public sensitivity to the risks of the crypto ecosystem, adding another layer of security premium discount beyond the fog of interest rates.
Institutions in the Game: Interest Rate Chips from Deutsche Bank to Global X
● Interest Structures Shaping Rate Perspectives: Traditional large banks like Deutsche Bank rely on interest rate spreads, foreign exchange, and corporate services for their core profits, preferring a predictable, stable, and slightly elevated interest rate environment to lock in long-term returns and manageable risks. In contrast, asset management institutions represented by Global X place greater emphasis on asset price elasticity and trading activity, with lower real rates favoring higher valuations for equities and alternative assets, providing a more attractive return curve for their products. This difference in business models directly translates into opposing answers to the question of "whether rates are close to neutral."
● Funds Increasing Amid the Fog: Even with a macro outlook full of uncertainty, some institutions choose to position themselves against the trend. For example, the OSL Group completed approximately $200 million in equity financing (single-source information) and continues to expand its crypto-related business amid unclear regulatory and interest rate pressures. Such cases indicate that not all institutions are simply "reducing risk assets"; some participants prefer to view the current stage as a window for establishing long-term strategic positions, betting on the crypto infrastructure and compliance processes over a five to ten-year horizon.
● Clients and Products Determine Expectation Camps: Different institutions face completely different client groups and product structures—banks serve more risk-averse enterprises and depositors who need stable cash flows and limited volatility; asset management companies often revolve around ETFs, thematic funds, and high-beta portfolios, needing to provide "stories and volatility" for clients chasing excess returns. Thus, on the question of "whether faster rate cuts are needed in the future," they naturally stand in different trenches: the former supports "high-end neutrality, mainly observing," while the latter looks forward to "real rates falling and valuations being revised upward." This game surrounding the interest rate path ultimately reflects on the entire market, including Bitcoin, through asset prices and capital flows.
The Endpoint of Interest Rates is Uncertain: The Crypto Market is Walking on Thin Ice
The divergence in interest rate paths, the phased decoupling of the dollar and Bitcoin correlations, and the overlay of regulatory and security shadows are forming an unprecedented new combination of uncertainty. The traditional formula of "weak dollar + rate cuts = crypto bull market" is being shattered by reality, forcing macro traders and crypto natives to reassess the simplified paradigms they have relied on for years.
For traders and institutions, this means that they can no longer use a single macro variable as a decision anchor: merely focusing on the interest rate dot plot or the dollar index may overlook the structural impacts of tightening regulation, compliance risks, and security incidents on capital behavior. The true pricing logic is gradually evolving into a multi-factor game of "interest rate expectations × regulatory progress × security trust," where any sudden change on one end could rewrite Bitcoin's short- to medium-term trajectory.
Looking ahead to the next few quarters, if the Fed's interest rate expectations and the dollar's movements continue to misalign—such as the market betting on rate cuts while the dollar remains strong due to global risk aversion—Bitcoin's price path is likely to exhibit diverse differentiation: one path is to continue being treated as a high-beta risk asset, fluctuating with stock and bond rotations; another path is to temporarily restore the narrative of "digital safe-haven asset" due to certain extreme political or financial events; a third possibility is that after the regulatory framework gradually takes shape, Bitcoin will be more included in compliant asset allocation baskets, with its volatility and correlation characteristics undergoing deep restructuring. For all participants, what truly needs to be adapted may not be any single rate hike or cut, but rather a crypto new cycle that can no longer return to a single narrative.
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