Trump wants a 1% interest rate, but the market only offers 3%: The divergence in expectations of Federal Reserve policies is testing the crypto market

Trump’s expectations for Fed rate cuts are facing reality. According to the latest news, although the new Fed Chair will soon be appointed by Trump, the market still expects only two 25 basis point cuts in 2026, far below Trump’s anticipated aggressive easing. This huge gap in expectations is pushing up market risk, and cryptocurrencies have experienced noticeable selling pressure over the past two days.

The Gap Between Market Expectations and Trump’s Expectations

Data Comparison: Expectations vs. Anticipation

According to CNBC’s latest survey, market expectations for Fed policy are quite restrained:

Why the Market Doesn’t Believe in Large Rate Cuts

Several key factors underpin this restrained stance:

• Inflation Still Not Fully Controlled: Although inflation is around 2%, market concerns about its stability remain; rash rate cuts could reignite inflation pressures.
• Strong Economic Fundamentals Support High Rates: The US economy remains resilient, not requiring aggressive monetary stimulus.
• Trump’s Tariff Threats: Trade tensions could push prices higher, further limiting the Fed’s room to cut rates.
• Consensus in Federal Funds Futures Market: This isn’t an isolated view from CNBC; futures market pricing aligns closely, indicating broad market consensus.

Wall Street professionals and economists do not believe the new Fed Chair will yield to Trump’s pressure to sharply lower the overnight rate to the low levels the President desires.

How Policy Uncertainty Impacts the Crypto Market

Macro Risks Amplify Safe-Haven Sentiment

This policy expectation gap is increasing market uncertainty. According to related reports, on the morning of January 26 in Asia, the cryptocurrency market faced significant pressure:

• Over $550 million in leveraged long positions were liquidated
• Bitcoin briefly dipped to $86,000, hitting recent lows
• Safe-haven assets like gold and silver continued their rally

Macro factors triggering this decline include:

• Trump’s threat to impose 100% tariffs on imported goods from Canada
• Rising risk of US government shutdown (funding expires on January 30)
• Uncertainty over US-Japan coordinated intervention in currency markets

Derivatives Market Has Already Adopted Defensive Posture

Data from crypto derivatives markets reflect traders’ cautious stance:

• Put option skewness increased
• Implied volatility rose
• Funds flowed into long-dated put options and downward strike positions

This indicates the market is preparing for greater volatility.

Key Information to Watch Next

The policy signals from the new Fed Chair will be decisive. While the market currently expects rates to stay around 3%, guidance from Powell (the current Fed Chair) on future policy paths, and the first statements from the new Chair after taking office, could alter market expectations.

In the context of a dense macro event calendar (including tech earnings reports and Fed rate decisions), implied volatility is expected to remain elevated. Before the government shutdown risk is clarified by January 30, cryptocurrency prices may continue to fluctuate.

Summary

Trump’s insistence on low interest rates sharply contrasts with market realities. The consensus is that—even if Trump appoints the new Fed Chair—it is unlikely to deviate significantly from economic fundamentals, and the rate cut space in 2026 is quite limited. This policy uncertainty, combined with recent risks like trade tensions and government shutdowns, is increasing volatility in risk assets. For crypto investors, it’s important to prepare for higher volatility in the short term and closely monitor Fed signals and government shutdown developments.