Powell Steps Down, Waller Takes Over: A Crypto Liquidity Turning Point Is Coming

On May 15, Powell officially stepped down as Chairman of the Federal Reserve, and Kevin Waller took charge of the Federal Reserve. The eight-year term came to an end—an epic bull market in crypto was spawned by the frantic pandemic-era money printing and liquidity injections. Then, aggressive rate hikes were used to crush inflation; core PCE still lingered around 3.3%. Meanwhile, Powell remained on as a member of the board until 2028, breaking a 75-year tradition—the Federal Reserve has entered a rare “dual-head” pattern.

Waller has been characterized as a “discipline faction” who dislikes the normalization of quantitative easing. He advocates for cutting rates and shrinking the balance sheet in parallel—slightly accommodating the White House’s calls to cut rates to ease debt pressure, while aggressively shrinking the balance sheet to reclaim liquidity that has been overissued. This playbook brings complex shocks to the crypto space: balance sheet reduction directly pulls market liquidity out of the market, putting risk assets first in line. But Waller has publicly positioned Bitcoin as a “digital gold reserve,” and once described it as “the new gold for people under 40,” a perspective unprecedented among Federal Reserve chairs. The contrast is sharp in history: in the early stage after Waller’s nomination was announced, Bitcoin fell from above $100,000 to the $70,000 range within 48 hours. Recently, as market expectations warmed, Bitcoin has broken above $80,000 and is up more than 13% over the past month—showing extreme divergences between bulls and bears.

Key takeaways: After Waller takes office, the Federal Reserve’s liquidity “valve” will shift from the “cautious easing” of the past three years to a contradictory mode of “rate cuts and liquidity injections, balance sheet reduction and liquidity withdrawal.” With Powell remaining as a board member, whether he can check and balance Waller’s policies is still unknown. Liquidity restoration is the prerequisite for a bull market, but balance sheet reduction is precisely continuous liquidity withdrawal. Chasing rallies at high levels requires extreme caution; however, as the policy path in the Waller era gradually becomes clearer, opportunities in phases will also emerge. How much water to release with rate cuts, and how much blood to draw with balance sheet reduction—the dynamic balance between the two is the key to determining the next crypto bull-bear cycle. #Gate广场五月交易分享