Powell's "Farewell Meeting" Signals Divergence: Federal Reserve Policy Shift and Repricing of Liquidity in the Crypto Market

Eastern Time, April 29th, Federal Reserve Chair Powell completed his final press conference after the Federal Open Market Committee meeting during his tenure. The committee ultimately decided to keep the federal funds rate target range unchanged at 3.50% to 3.75%, a result that itself aligned with market expectations. However, behind this seemingly calm decision lies the largest internal disagreement since 1992, as well as a profound reflection from Powell on the impact on the Fed’s independence. For the crypto market, the uncertainties about inflation paths revealed in this “final press conference,” the fading of rate cut expectations, and the potential shift in macro policy environment are far more influential than the rate decision itself.

Underlying Currents Beneath a Steady Stance

The focus of this meeting’s vote was not on the level of interest rates, but on whether to retain or remove a phrase in the policy statement. The statement kept a language that market interprets as “dovish,” implying that the next rate adjustment is more likely to be a cut.

However, three regional Fed presidents voted against this, and they, along with an increasingly larger faction within the committee, believe that in the current environment of accelerating inflation, this wording is no longer realistic. Although most members ultimately decided not to amend the statement, Powell acknowledged at the press conference that “the number of people supporting a more neutral stance in the wording has increased,” and the divergence is closer than at the last meeting. This indicates that the Fed’s policy focus is quietly shifting, and a longer period of maintaining high interest rates is emerging.

From Tariff Shocks to Energy Crises: Overlapping Challenges

To understand the Fed’s current dilemma, one must trace back to the supply shocks experienced over the past few years.

After the COVID-19 pandemic shock in 2020, the U.S. economy underwent unprecedented lockdowns and reopenings, followed by rising inflation. In 2022, the Russia-Ukraine conflict again disrupted global energy and supply chains. Subsequently, the new administration’s tariff policies, which involved one-time price hikes, have continuously injected stickiness into core inflation. Recently, tensions in the Middle East have sharply escalated, blocking key energy trade routes, with Brent crude oil approaching $120 per barrel, adding new pressure to already high inflation.

Against this backdrop of overlapping shocks, Powell presided over his final meeting. He described the environment as “extraordinarily difficult,” because each supply shock simultaneously pushes inflation higher and suppresses growth, making the central bank’s balancing act exceptionally complex.

Dual Narratives of Inflation and Crypto Liquidity Logic

The current Fed decision framework is being dominated by two intersecting inflation narratives, which are directly related to the outlook for global liquidity that the crypto market cares most about.

“One-off” Tariff Transmission and Risk Asset Valuations

The first narrative concerns tariffs. The committee’s baseline assumption is that tariffs cause only a one-time increase in price levels, which will recede from year-over-year data. The key window to verify this assumption is in Q2 and Q3. If core inflation declines as expected, risk asset valuations will get relief; otherwise, concerns about “sticky inflation” will sharply rise, putting pressure on high-growth assets including cryptocurrencies.

Energy Shocks’ “Seeing Through” Dilemma and Diverging Safe-Haven Demand

The second narrative concerns energy. In theory, central banks should “see through” temporary supply shocks. But Powell admitted that the current situation no longer fits textbook models. Years of inflation above target have made it extremely difficult to ignore rising oil prices. He explicitly stated: “Before considering rate cuts, we want to see energy shocks enter a decline phase.” This statement essentially sets a precondition for rate cuts. In the crypto market, this signals a more prolonged restrictive rate environment, which will suppress the appeal of non-yielding assets like Bitcoin to traditional capital seeking income, even as it may reinforce its long-term narrative as an inflation hedge.

The “Uncomfortable Balance” in the Job Market and Retail Capital Flows

The U.S. economy’s growth rate above 2% and a low unemployment rate of 4.3% show resilience. But Powell pointed out a structural concern: extremely low quit and hiring rates mean that new employment is nearly zero, and the labor market is in an “uncomfortable balance.” For those without jobs, entering the market is very difficult. This macro picture suggests that in the crypto space, projects relying on retail capital inflows, such as altcoins and decentralized finance (DeFi) applications, may face stagnating user growth. When employment feels unstable, individuals’ ability and willingness to participate in high-risk investments decline.

A Public Display of Policy Direction

The most notable public sentiment at this meeting was the internal disagreement within the committee.

The three dissenters and some other members argued that: with inflation high and the outlook unfavorable, retaining a “dovish” language could damage the Fed’s credibility. They preferred to shift the statement toward a neutral stance, making both rate hikes and cuts seem equally possible.

The majority led by Powell believed that maintaining the current stance was a more cautious risk management approach. They argued that once forward guidance is changed, it must be sustained, and the Fed cannot easily backtrack in one or two meetings. Powell explained: “The market has not misunderstood our reaction function.” In other words, the market has already priced in near-zero probability of rate cuts, so the committee does not need to emphasize this through statement modifications.

For crypto observers, this public disagreement signals that the Fed’s policy path is shifting from a clearly dovish bias toward a highly uncertain, possibly dual-directional stance. This weakens the market’s long-held implicit trust that the Fed will eventually rescue the markets.

Beyond Rate Decisions: Institutional Signals

The most profound and perhaps overlooked message of this press conference, beyond the discussion of interest rates, relates to a subtle examination of “decentralization.”

Powell spent considerable time defending his continued membership in the Fed’s Board after his term ends on May 15. He attributed this to the unprecedented legal actions taken by the current government—“unprecedented in the 113-year history of the Fed”—which he believes “threaten our ability to conduct monetary policy independently, without political considerations.” His core purpose was to ensure stability within the institution amid political pressures until the situation becomes clearer.

This candid reflection elevates the event from a technical policy discussion to a philosophical debate about institutional independence. The “Fed independence” Powell defends bears a strange mirror image to the crypto industry’s pursuit of “decentralization” and “censorship resistance”: both aim to establish a financial system not subject to arbitrary control by a single central authority. The former relies on laws and conventions; the latter on cryptography and consensus mechanisms. When the central bank’s independence is exposed to vulnerabilities, it objectively supports the long-term existence of non-sovereign value networks like Bitcoin.

Industry Impact: Crypto Markets Under Macro Headwinds

Based on signals from the meeting, the impact on crypto markets is multi-faceted.

Repricing of Rate Cut Expectations

Powell’s assessment that “policy stance is roughly at the high end of neutral” and his clear outline of rate cut prerequisites directly freeze optimistic expectations for rate cuts this year. The crypto market had hoped for a new global easing cycle to fuel a bull run. The failure of this expectation hits asset prices hard. As of April 30, Bitcoin was priced at $75,692.20, down 2.05% in 24 hours; Ethereum at $2,245.06, down 3.62%. The short-term weakness reflects insufficient liquidity narrative momentum.

Shift in Risk Appetite and Capital Flows

A prolonged high-interest-rate environment systematically alters how capital is allocated across assets. When risk-free and yield-bearing traditional financial products offer attractive returns, capital is less inclined to chase higher-risk, non-yielding assets. Elevated rates increase opportunity costs for institutional participation in crypto. If the Fed shifts toward rate hikes, it will trigger a sharp de-risking process, with crypto—one of the most volatile asset classes—being among the first to suffer.

Independence Concerns and the “Digital Gold” Narrative

Powell’s frank warning about the Fed’s independence being under threat provides another argument supporting Bitcoin’s core narrative. A politicized central bank might print money to meet short-term political goals, risking long-term inflation devaluation. This is precisely the concern of non-sovereign asset advocates. Although the market has not yet priced this narrative into prices, it offers a long-term value floor for Bitcoin, preventing faith collapse amid macro headwinds.

Macro Headwinds for Decentralized Applications

Stagnant job creation may, in upcoming quarters, impact retail investors’ disposable income and risk appetite. On-chain activity, DeFi usage, and NFT trading volumes could face downward pressure as macroeconomic conditions tighten.

Conclusion

Powell’s final press conference was a calm meeting with no rate hikes or cuts, but it may mark the beginning of a new macro trading era. As the certainty of the “Fed put” gradually diminishes, crypto markets are no longer facing a central bank that is inevitably dovish and liquidity-providing, but an institution with increasingly public internal disagreements and a limit approaching in its inflation tolerance.

For crypto participants, this means that macro narratives will no longer be mere background noise but the primary drivers of asset prices for a long time. Liquidity is no longer abundant, and narratives must withstand the test of reality. In this environment, closely monitoring Fed policy logic, understanding the stress points of traditional finance, and their deep connection to non-sovereign assets are no longer optional—they are essential.