By the end of 2025, disagreements within the Federal Reserve are causing turmoil in the crypto world. Investors who rely on the old logic of "cutting interest rates is good for risk assets" have taken a hit this time.

Speaking of rate cuts, many people think they are all the same. Actually, they are not. Historically, the Fed's rate cuts fall into two categories: one is preemptive and defensive, as in 1995 and 2019—when the economy was still stable, the Fed started to safeguard; the other is forced, as in 2001 and 2008, when a financial crisis had already struck, and rate cuts were more of a "post hoc" measure.

The current US economy is like walking a tightrope. On one side, employment growth has significantly slowed down; on the other, prices remain sticky above the Fed's 2% target. This "growth cannot keep up, inflation cannot be pushed down" situation makes the Fed's rate cuts quite awkward—rather than celebrating strong growth, they seem more like patching up a potentially collapsing economic system. Michelle Meyer, Chief Economist at US Bank, put it plainly: "Rate cuts are not the accelerator, but the airbag."

The reason for the conflicting voices within the Fed ultimately stems from the chaotic signals sent by the US economy itself. The GDP data for the second quarter is right here, and the members' assessments of the situation are completely out of sync.