Breaking! Fed Chair Tears Up "Forward Guidance" Himself, Inflation Cooling + AI Revolution, Is $BTC and $ETH's Turning Point Coming?

Let me tell you, at the ECB's Sintra forum, Fed Chair Warsh dropped a bombshell. He said that from now on, the Fed will no longer tell you in advance where interest rates are headed.

Simply put, they are abandoning the old tool of "forward guidance." Warsh's exact words: we need to "blaze a new path," and at the next meeting (four weeks from now), he hopes officials will engage in a truly family-style debate. The message is clear——stop watching my mouth, look at the data.

What does this mean for the crypto market? The Fed is no longer giving you a roadmap, which actually increases uncertainty. But note, Warsh also confirmed that inflation risks have declined over the past four weeks. That's a mildly positive signal for risk assets.

Even more explosive is his take on AI. He said AI model capabilities are growing exponentially, reshaping the economy at an unprecedented pace. The supply expansion brought by AI could allow the economy to grow faster with lower inflationary pressure. In plain English: if AI truly boosts productivity, the Fed can stay accommodative for longer, which is a long-term positive for scarce assets like Bitcoin.

But Warsh didn't go all in. He acknowledged that whether AI ultimately becomes inflationary or deflationary depends on data judgment by central banks. And there remain "serious questions" about AI's impact on employment. So don't rush to go all-in.

On balance sheet reduction, Warsh's stance hasn't changed: he wants the balance sheet to shrink. The current ~$6.7 trillion is still far above pre-pandemic levels, but "18 weeks is far from enough" to finish the reduction. This implies liquidity tightening will continue slowly, but at a manageable pace.

Don't forget that balance sheet reduction works through asset prices. Any major B/S decision will go through public discussion and be collectively decided by the FOMC. That means there's a buffer for the market.

Details of the reform have also emerged. Warsh has established five internal working groups, focusing on communication mechanisms, the balance sheet, data usage, productivity and employment, and the inflation framework. The working group members could be announced as early as next week, and external experts, including international individuals, will be invited. This group is redesigning the entire Fed decision-making system.

Warsh also emphasized the Fed's independence: "You won't see any change." This is also a response to Trump's pressure for rate cuts. An independent Fed means policy won't be distorted by politics, which is healthy for the market in the long run.

Finally, he believes the U.S. is facing a huge opportunity for productivity gains, with potential growth already on an upward trend. He is not afraid of productivity-driven growth.

To summarize: abandoning forward guidance + cooling inflation + AI productivity dividend + slow balance sheet reduction + independent central bank = short-term volatility increases, but the long-term fundamentals are biased toward optimism.

For $BTC and $ETH, improved liquidity expectations (cooling inflation, increased likelihood of rate cuts) are positive, but the opaque policy path will increase short-term trading costs. The AI narrative may benefit related concept tokens (e.g., $FET, $AGIX), but Warsh himself has no direct link to crypto; this is just a macro narrative mapping.

If you ask me, at this point, don't bet on a direction—wait for the data to land. Warsh made it very clear: everything depends on data. Until the data is out, reduce positions and stay on the sidelines—that's rational.

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