WealthBee Monthly Report: The Federal Reserve Breaks Through Triple Pressure of Interest Rate Cuts, Crypto Assets Solidify Mainstream Foundation Amid Volatility

In October 2025, the world welcomed a breather as the Federal Reserve embarked on a key turning point in its interest rate cut cycle, with the injection of market liquidity driving a widespread rebound in risk assets. Amid the macroeconomic tailwinds and its own high volatility, crypto assets exhibited a significant "polarization" characteristic. On one hand, the market experienced severe short-term price fluctuations, with profit-taking and doubts about the policy path triggering several technical corrections. On the other hand, the deeper storyline is that the foundation for its mainstream adoption is being continuously solidified amidst the volatility.

Under the triple pressure of data fog, internal route discrepancies, and external political pressures, the Federal Reserve initiated its second interest rate cut of the year in October, lowering rates by 25 basis points as expected. Although the market had fully anticipated this decision, the exceptionally difficult trade-offs behind it still cast a shadow of uncertainty over future policy directions.

The prolonged federal government shutdown led to a significant absence of key economic data, including the non-farm payroll report, forcing the Federal Reserve to "drive in the fog." Nevertheless, scattered information still outlined the contours of an economic slowdown: the unemployment rate rose to a near-high of 4.3% in August, and major companies like Amazon and Target announced unprecedented layoff plans, reinforcing the judgment that the labor market is cooling, thus providing a basis for rate cuts. Meanwhile, the consumer price index rose by 3% year-on-year in September, and although it approached the 2% target after excluding tariff impacts, it still indicated that the anti-inflation process has not been fully completed, leaving the sustainability of easing policies to be observed.

This complex situation led to a rare polarization within the Federal Reserve. While the newly appointed governor, Milan, advocated for a more aggressive 50 basis point cut, Kansas City Fed President Schmid insisted on maintaining rates. This dual dissent was unprecedented in this round of rate cuts, exposing profound divisions within the decision-making body between "preventing recession" and "preventing inflation." As Powell stated after the meeting, there are "obvious differences" within the committee regarding the next steps in December, and the next rate cut is far from a certainty. This statement immediately triggered market turbulence, with CME Watch showing that market expectations for a rate cut in December plummeted from 90% before the meeting to 67%.

At the same time, the ongoing political pressure from the White House further tested the Federal Reserve's independence. President Trump repeatedly criticized Powell for being slow to act, and the dissenting vote cast by the Fed governor he appointed, Milan, was seen as a clear sign of political influence. With Powell's term ending in May next year, the selection process for his successor has been led by Treasury Secretary Basent, adding another layer of uncertainty to the future monetary policy path. Against this backdrop, the Federal Reserve also announced that it would officially end its three-and-a-half-year balance sheet reduction program starting December 1, a decision interpreted by the market as the Fed reserving policy space to respond to a potentially more significant economic slowdown.

In the future, the Federal Reserve's policy path will increasingly rely on clear data guidance, and the premise for all of this is the resolution of the political deadlock in Washington and the restoration of key economic statistics.

Wall Street's wild October swung between panic and euphoria, with the U.S. stock market exhibiting significant volatility and structural gains under the resonance of multiple factors. Although at the beginning of the month, the Nasdaq index plummeted 3.56% in a single day due to Trump's threat to cut Democratic projects and the ongoing government shutdown, the market gradually regained lost ground and repeatedly challenged new highs, supported by heightened expectations of Fed rate cuts and improving corporate earnings. Technology stocks and the semiconductor sector became the main engines of this market rally, with their performance fully reflecting the interactive effects of policy, earnings, and industry trends.

The Federal Reserve's monetary policy direction is key to the market's shift in sentiment. New York Fed President Williams explicitly supported further rate cuts within the year to address the risk of a sharp slowdown in the labor market. At the same time, the September CPI data, which came in below expectations, somewhat alleviated inflationary pressures, while the government shutdown delayed the release of economic data, further reinforcing market expectations for the Fed to maintain an accommodative stance. This expectation pushed the dollar index lower, further stimulating the valuation recovery and rise of growth assets represented by technology stocks.

On the corporate earnings front, the third-quarter earnings season became an important test for evaluating the commercial value empowered by AI. Although Tesla's net profit fell by 37% year-on-year, its energy business revenue surged by 44% year-on-year, and its AI infrastructure asset scale reached $6.621 billion, demonstrating a deepening strategic layout in the energy and artificial intelligence sectors. The market's moderate reaction to Tesla confirmed investors' understanding and patience regarding long-term investments in AI.

Silicon Valley tech giants reported overall strong performances, surpassing analysts' expectations. For instance, Alphabet, Google's parent company, saw its revenue grow by 17.3% year-on-year, while Microsoft's revenue grew by approximately 18% year-on-year. Among these, AI and cloud services became core engines. A prominent feature of this earnings season is that cloud business and AI-related revenues became the fastest-growing main engines for all giants. For example, Alphabet's Google Cloud revenue surged by 33.5% year-on-year, and Microsoft's intelligent cloud division also saw revenue growth of about 28% year-on-year. This clearly indicates that the strong demand for AI infrastructure and solutions from enterprises is directly translating into financial growth for the giants.

To seize the high ground in the AI era, these giants are significantly increasing capital expenditures to invest in AI infrastructure. Microsoft's capital expenditure in the third quarter surged by over 74% year-on-year to $34.9 billion, while Alphabet raised its full-year capital expenditure guidance to $91 billion to $93 billion. Behind this "arms race" is the giants' optimistic expectations for future AI demand and their strategic determination to establish long-term advantages.

This earnings season has clearly depicted a new development landscape for Silicon Valley giants, achieving strong growth through their deep layouts in cloud and AI, and making unprecedented capital investments to fully bet on an AI-driven future.

Overall, the U.S. stock market in October exhibited characteristics of "upward movement amidst volatility, led by technology stocks," supported by both policy easing and earnings resilience. Although political uncertainty and corporate earnings divergence brought volatility, the capital expenditure cycle driven by the AI technology revolution and the growth of cloud business continue to inject sustained momentum into the market.

However, these aggressive expansion strategies may sharply conflict with macro risks such as geopolitical tensions and government shutdowns. As of now, the U.S. government shutdown has lasted over 30 days, and it is estimated that the ongoing shutdown could result in losses of $7 billion to $14 billion per week, which cannot be recovered once the government reopens. The IMF has rarely issued a warning about a potential stock market crash, and Goldman Sachs has also pointed out that the risks of a market downturn outweigh those of an upturn.

The highly anticipated "Uptober" seasonal rebound in the crypto market encountered a dual ambush of geopolitical tensions and a fierce liquidation wave in October 2025. Bitcoin's monthly closing price fell by 3.69%, far from the historical average return rate of 21.89% for the same period, primarily due to the marginal tightening of global liquidity combined with the concentrated liquidation of previously high leverage, which jointly suppressed the price increase potential.

It is important to note that the market's short-term weakness has not shaken the foundation of Bitcoin's long-term value. Every market fluctuation serves as a test for the quality of assets. The underlying structure of the Bitcoin market is undergoing a fundamental transformation: the era dominated by retail investors is fading, and the capital flows and decision-making logic of institutional investors are reshaping the price formation mechanism.

This transformation is particularly evident in capital flows. When DATs companies and ETF funds experienced temporary weakness, capital instead accelerated towards core assets like Bitcoin, which have strong compliance and high technical barriers; MicroStrategy's firm stance in increasing its holdings by 388 Bitcoins during the market correction demonstrates that institutional capital is still casting trust votes through real actions.

On a macro level, significant changes are also brewing. The Federal Reserve's rate cut in October, combined with the global broad money supply (M2) exceeding $96 trillion, reaching a historical high, signals the beginning of a global liquidity easing cycle. This macro backdrop creates an ideal breeding ground for risk assets like Bitcoin. Politically, there are also positive signals, such as the Trump administration's clear support for crypto assets and the disclosure of multiple central banks increasing their holdings by family members, providing unprecedented policy certainty for the market.

As noted in a16z's "2025 Cryptocurrency Status Report": "Cryptocurrency has left its adolescence and officially entered adulthood." This report defines 2025 as the year of cryptocurrency and highlights four significant characteristics of industry maturity: a shift from hostility to support at the regulatory level, with the "GENIUS Act" establishing a clear compliance framework; at the market structure level, institutional funds replacing retail investors as the price-dominating force, evidenced by a net inflow of $7.8 billion into Bitcoin spot ETFs in the third quarter; at the capital flow level, institutions continue to increase their holdings amidst volatility, driving capital concentration towards quality assets; and at the technological level, Bitcoin continuously enhances its core value as a settlement layer through increased resistance to censorship.

In summary, the crypto world in 2025 is at a critical turning point: it enjoys the institutional capital, regulatory clarity, and technological upgrades brought by mainstream adoption, but it must also face new challenges arising from this—changes in cyclical patterns, adjustments in market structure, and inevitable high volatility.

As the year-end approaches, the market is inevitably filled with a strong sense of caution, but short-term panic will eventually be digested over time. We can still expect that assets with genuine technological value and compliance advantages will demonstrate resilience across cycles in the wave of accelerated integration between traditional finance and the crypto world.