Why Powell's Speech Is Bullish for ETH Over BTC

Author: Juan Aranovich Source: unchainedcrypto Translation: Shan Ouba, Golden Finance

At the beginning of this week, the market was in turmoil. US stocks fell, the crypto market plummeted, and everyone was nervous. A friend asked me why the market felt so heavy. My answer was simple: uncertainty.

Federal Reserve Chairman Jerome Powell was scheduled to speak in Jackson Hole on Friday, but no one knew what he would say. Traders hate uncertainty the most. So everyone reduced risk, sold their positions, and waited and saw what would happen. Fast forward to today, and Powell's words have completely ignited the market, especially those who bet on Ethereum DeFi, who have become big winners.

Why did Ethereum DeFi assets see the biggest gains after Powell's speech? A weak job market opens the door to interest rate cuts, potentially attracting yield-seeking investors to DeFi. Federal Reserve Chairman Jerome Powell surprised markets in Jackson Hole on Friday by suggesting the Fed could begin cutting interest rates as early as September. In a highly anticipated speech, Powell expressed concern about a slowing job market, even as tariffs continue to push up consumer prices. The comments marked a sharp shift from the Fed's prioritization of inflation over the past four years, instantly igniting risk assets. Ethereum surged 14% to $4,800, nearing a new all-time high. Bitcoin, by contrast, rose only 4%. On the prediction platform Polymarket, the probability of a 25 basis point rate cut in September rose from 60% to 80%. Economist Alex Kruger summed up market sentiment at the time, saying, "Powell's dovish stance was shocking and completely unexpected by the market." However, in the crypto market, the biggest gainers weren't BTC, but rather yield-generating assets or those related to DeFi—particularly on Ethereum. Powell's Pivot Powell acknowledged that the balance of risks had shifted. For most of this cycle, the Fed's primary concern was runaway inflation. But now, Powell frankly acknowledged that employment and growth were equally at risk. He described a "strange equilibrium" in the labor market: both the supply and demand for labor were slowing simultaneously. This rare situation, he warned, could quickly devolve into layoffs and rising unemployment. In his words: "The balance of risks appears to be shifting." That statement alone was enough to excite traders, but Powell also went further, suggesting the Fed was moving away from average inflation targeting. This framework, introduced in 2020, allows for periods of moderate inflation above 2% to make up for past periods below target. It was designed for a zero-interest-rate environment, and Powell acknowledged that today's economic environment is completely different. The Fed maintains a 2% inflation target, but Powell emphasized that stable inflation expectations cannot be taken for granted. He acknowledged that tariffs are pushing up consumer prices but downplayed concerns that they would trigger a new inflationary spiral. In other words: the door is wide open to rate cuts. Powell essentially cleared the way for a September rate cut, which is typically bullish for risky assets. In the hours following his speech, the crypto market saw nearly $400 million in forced liquidations, ruthlessly crushing short sellers. While US stocks rallied, the crypto market saw even more dramatic gains. Economist Kruger quipped: "Rest in peace to those who were harvested on the eve of Jackson Hole and sold their stocks at a low point." Although risk assets generally rose, the biggest gains came from Ethereum and its related tokens: ETH itself soared by double digits, and seven of the 10 best-performing tokens of the day were ETH Beta (Ethereum-related) assets: MORPHO, ENA, AERO, ARB, LDO, and ENS. Even ETC, long considered a "dinosaur coin," soared by 18%. The only non-Ethereum-related token was the meme coin SPX69000. As the home of DeFi, Ethereum's TVL (total locked value) has reached $94 billion, with funds clearly flowing into Ethereum-related assets and yield-generating products. MORPHO, AERO, and Ethena's ENA saw the most impressive gains, with the highest reaching 20%.

Falcon Finance partner Jiang Lingling said in an interview with Unchained: "We see funds flowing into M

orpho (capital-efficient lending), Lido (staking income), Ethena (synthetic dollar similar to a savings tool), and Aerodrome (liquidity center on Base)."

DeFi Answers the Question of Yield

On the Bits + Bips show, Maple Finance co-founder Sid Powell explained why this is happening:

"As traditional interest rates fall, the spreads and yields of crypto will widen, and I think this will attract more funds to the chain. This is consistent with the 2020 and 2021 The lower the interest rate, the more pronounced DeFi's yield advantage, as the gap between on-chain returns and traditional finance is magnified, which naturally benefits DeFi-related tokens. Prashant Maurya, CEO of the decentralized GPU network Spheron, told Unchained: "Lower borrowing costs and more capital entering the crypto market will amplify DeFi activity, making these tokens natural beneficiaries of a dovish Federal Reserve." ENA (Ethena's native token and the issuing token of the USDe stablecoin) has risen 19% in the past 24 hours.

Ethena Labs founder Guy Young explained on X, although he admitted to being biased:

"During the last rate cut in Q4 2024, the spread between the money rate and Treasuries widened from ~0% to over 20% in a matter of weeks. At that time, the supply of USDe doubled in a matter of weeks. If this scene is repeated, we will see over $20 billion of USDe supply in less than a month. Ethena is the most sensitive asset in the world to falling interest rates."

Institutional levels are also optimistic. Lingling Jiang of DWF Labs told Unchained: "Capital is flowing into yield-bearing stablecoins and tokenized treasuries. For many institutions, these assets are becoming the modern equivalent of cash." In short, Powell has ignited the next risk-on cycle. With macro headwinds easing and institutional demand poised to take off, Bitcoin appears poised to turn the Jackson Hole speech into a new tailwind. The key question now is: Can this rally last? The sustainability of this rally hinges on whether real interest rates can align with market rates and whether governance or security shocks can be avoided.