JPMorgan reverses interest rate cut expectations: rate hikes expected in 2027, changing the liquidity environment in the crypto market

JPMorgan Chase has recently changed its stance. This Wall Street giant no longer expects the Federal Reserve to cut interest rates, but instead anticipates rate hikes in 2027. Although this shift in outlook appears sudden, it reflects a reassessment of the US economy and inflation outlook. For the crypto market, this signal’s implications should not be ignored.

The Real Background of the Expectation Reversal

What does JPMorgan Chase’s revised outlook mean?

This adjustment by JPMorgan Chase is not happening out of nowhere. According to the latest information, internal disagreements within the Federal Reserve over the path of rate cuts have reached a ten-year high, forming two main camps: “rapid rate cuts” and “cautious wait-and-see.” While market traders still bet on the 10-year US Treasury yield falling to 4%, institutional investors like JPMorgan Chase clearly have a different view.

The underlying logic behind this reversal is noteworthy: from initially expecting the Fed to maintain an easing bias through 2026, to now projecting rate hikes in 2027, JPMorgan Chase is essentially saying— the US economy’s fundamentals may be more resilient than the market expects, or inflation pressures could be more stubborn to subside.

New Variables in the Policy Environment

The Trump administration’s policies on credit card interest rate caps have also influenced market expectations. While primarily impacting bank profits, this policy reflects the government’s optimism about economic growth—only when economic prospects are relatively positive would the government dare to push such policies that could suppress financial institutions’ earnings. This policy signal somewhat aligns with JPMorgan Chase’s rate hike expectations.

Impact Pathways on the Crypto Market

The Relationship Between De-risking and the Crypto Market

Interestingly, another recent report from JPMorgan Chase indicates that the “de-risking” phase in the crypto market is nearing its end. This seems to conflict with its rate hike expectations, but the logic holds:

Last year’s de-risking mainly stemmed from MSCI’s exclusion-driven forced de-risking by institutions. Now that this pressure has eased, the short-term panic selling in crypto has ended. However, this does not mean liquidity conditions will immediately improve—on the contrary, the expectation of rate hikes suggests that the overall tightening of liquidity might just be beginning.

JPMorgan Chase’s Own Signals on Crypto Strategy

It’s worth noting that although JPMorgan Chase has shifted its rate cut expectations, its crypto initiatives have never stopped. Expanding JPM Coin to the Canton network, advancing tokenized deposit services, and optimistic views on RWA (Real World Assets) tokenization—all continue. This indicates that JPMorgan Chase’s long-term valuation of the crypto market remains unchanged; only its short-term macro liquidity outlook has been adjusted.

How Should the Market Respond?

The shift in rate hike expectations implies:

• Short-term liquidity-driven upside may be limited
• But a strong economic fundamental could support long-term asset values
• Institutional efforts in RWA and tokenized assets might slow down but remain on track
• The crypto market needs to shift from liquidity-driven to fundamentals-driven growth

Summary

JPMorgan Chase’s transition from expecting rate cuts to expecting rate hikes essentially reflects a reassessment of US economic resilience. This signal is bearish for short-term liquidity in the crypto market but has limited impact on long-term fundamentals. The crypto market has completed its de-risking phase; the next test is whether it can sustain growth through real-world applications and institutional deployments amid tightening liquidity. JPMorgan Chase’s continued investments in crypto suggest a certain confidence in the market’s long-term value—even if short-term liquidity faces challenges.