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Powell’s Rate Cuts & ETH ATH: What’s Driving the Market Rally?

Aug 28, 2025MEXC

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August 22, 2025 — U.S. Federal Reserve Chair Jerome Powell delivered what markets widely interpreted as a strong signal of future rate cuts during his keynote speech at the annual Jackson Hole central banking symposium. Powell referenced the most recent employment statistics, noting that “the data suggest that downside risks to the labor market are increasing, and this trend could quickly evolve into a sharp rise in layoffs and a higher unemployment rate.” He further stated that if labor market risks intensify, an adjustment in policy stance would be justified — a clear indication that interest rate reductions may be on the horizon, contingent on jobs data.

The address, Powell’s final public appearance of his tenure, was quickly seen as a long-awaited policy turning point. U.S. equities surged in response. Dow Jones Industrial Average rose 1.89%. S&P 500 climbed 1.52%. Nasdaq Composite advanced 1.88%. Crypto-related stocks reacted even more strongly, with SharpLink, BitMine, and Coinbase all posting significant gains.

At the same time, the global cryptocurrency market capitalization rebounded to $4.1 trillion, driven by Ethereum’s explosive rally. ETH jumped more than 14.3% in a single day, reaching $4,943.43 on August 25 — a new all-time high not seen in nearly four years. Ethereum’s breakout fueled broad gains across the crypto ecosystem, including Layer 2 scaling projects, staking tokens, and infrastructure plays. Analysts described the surge as a textbook example of “policy expectations” merging with “market euphoria” to create a historic rally.

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1. Powell’s Shift: From “Holding the Line” to Dovish Hints

Since early 2025, markets had been anticipating a potential rate cut from the U.S. Federal Reserve. Yet Chair Jerome Powell consistently maintained a hawkish stance, refusing to offer any clear signals despite mounting pressure from President Trump and signs of a cooling labor market. He repeatedly stressed the importance of maintaining a moderately tight monetary policy.

However, Powell’s remarks at the Jackson Hole symposium suggested a subtle shift. "Given that the labor market is not particularly tight and faces increasing downside risks, the likelihood of persistent inflationary pressures seems low," he said. Markets interpreted this as a prelude to rate cuts. Powell further noted that if a strained labor market threatened price stability, the Fed would act preemptively.

This marked Powell’s transition from holding firm to adopting a more dovish tone, fueling strong market expectations for rate cuts. According to market data, the probability of a 25-basis-point cut in September surged from 75.5% before Powell’s speech to 91.1% afterward. The likelihood of at least two rate cuts in the Fed’s remaining three policy meetings this year climbed to 83.9%, signaling a major shift in monetary policy outlook.

2. Is the Dovish Signal Overdone?

Although Powell’s speech was quickly seen by the market as a turning point in monetary policy, a closer look at the details suggests that his remarks were more of a defensive policy contingency than a genuine commitment to easing. Powell emphasized that U.S. policy rates are now much closer to the neutral rate compared with last year, fluctuating within a range of about 100 basis points. This indicates that the Federal Reserve could slow the pace of its actions, but it does not mean that tightening has ended, nor does it imply that easing is imminent. He also made it clear that the labor market is in a “peculiar balance,” with both supply and demand weakening simultaneously. If this trend were to spiral out of control, a wave of layoffs and a surge in unemployment would be inevitable. Therefore, this series of remarks should be seen as leaving policy room to address potential risks in advance, rather than as an early “dovish feast” handed out to the markets.

3. The Logic Behind ETH’s Surge: Narrative, Sentiment, and Structural Forces

If policy expectations served as the spark for the rally, then ETH’s explosive surge was the inevitable result of multiple forces resonating together.

3.1 Short Squeeze in Options and Sentiment Overlap

The short squeeze effect in the options market was the most immediate catalyst. According to Coinglass data on August 27, liquidations in the past 24 hours reached $270 million, with the majority concentrated in short positions. A large number of bearish ETH traders were forced to close their positions, amplifying upward momentum and turning the rally into a full-blown short squeeze.

3.2 Institutional Entry

On-chain data shows that BitMine (BMNR) received 131,736 ETH within the past 12 hours. As of August 27, BitMine’s ETH holdings stood at approximately 1.7 million ETH.

At the same time, ETH spot ETFs have been seeing rapid increases in holdings. Sustained net inflows indicate that institutions are moving beyond short-term speculation and are positioning strategically. This suggests that ETH’s rally is being driven more by structural capital inflows rather than pure retail sentiment.

3.3 Ethereum Ecosystem Expansion

In addition to external catalysts, the robust growth of the Ethereum ecosystem itself has been a key pillar supporting ETH’s rise. Recently, tokens in the Layer 2, staking, and infrastructure sectors have all posted gains, reflecting optimism about Ethereum’s long-term development.

Layer 2 Solutions: With mainnet transaction fees remaining elevated, Layer 2 solutions have become essential for easing network congestion and lowering costs. Platforms such as Arbitrum continue to post high daily trading volumes, underscoring demand for efficient, low-cost transaction options.
Staking Boom: Ethereum staking remains in high demand, driving the growth of liquid staking protocols like Lido, whose TVL has continued to expand. The prosperity of the staking market has both increased ETH lock-up levels and reinforced confidence in ETH’s long-term value.
Infrastructure Improvement: Ongoing enhancements to Ethereum’s infrastructure are making development more seamless and accessible, attracting more developers and projects to the ecosystem. This in turn drives greater application adoption and boosts ETH’s intrinsic value.

3.4 Financialization and Renewed Risk Appetite

Powell’s dovish signals on rate cuts eased concerns over rising interest rates and improved investor risk appetite, a shift that has been particularly pronounced in the crypto market. As a high-risk, high-reward asset, ETH quickly became a focal point under these expectations. Capital flowed out of safe-haven assets and into risk assets, further fueling ETH’s rally.

4. ETH Outlook and the Pace of Policy Implementation

Overall, Ethereum’s surge has been both a reflection of policy expectations sparked by Powell’s remarks and the result of market sentiment, on-chain capital flows, and institutional narratives resonating together. However, its future trajectory must still be assessed with caution.

If the Federal Reserve does cut rates in September, positive market feedback could be further amplified, potentially driving ETH into a new breakout cycle. On the other hand, if rate cuts are delayed or smaller than expected, the market could see a sharp correction — and some investors who chased the rally are already feeling the sting of FOMO-induced losses. More importantly, the battle over Ethereum’s narrative has only just begun. Whoever succeeds in establishing a valuation framework comparable to “ETH-per-share” will hold the dominant position in shaping the structural discourse of the market.

5. Can Ethereum Ecosystem Projects Lead the Next Breakthrough?

5.1 BMNR (BitMine Immersion Tech)

As the world’s largest ETH holder, BMNR has accumulated over 1.2 million ETH (worth approximately $5 billion) with the goal of controlling 5% of global ETH supply for staking yields. BMNR serves as a benchmark for financializing ETH and represents a key institutional entry pathway.

5.2 ENA (Ethena)

Through its StablecoinX division, Ethena plans to repurchase $260 million ENA tokens (about 8% of circulating supply) within six weeks. It has also activated its "fee switch" mechanism, distributing protocol revenue to sENA holders with projected yields ranging from a conservative 4% annually to over 10% in optimistic scenarios. ENA represents a high-flexibility synthetic asset play with a clear yield-driven narrative.

5.3 PENDLE

Pendle's TVL has surged past $10 billion, setting a new all-time high. Its Boros module converts perpetual funding rates into tradable assets, bringing in massive liquidity. Combined strategies with Ethena and Aave account for nearly 60% of TVL growth. Pendle stands out as a core DeFi asset powered by both technological innovation and institutional adoption.

6. Conclusion

This round of Ethereum’s rally is the product of a multidimensional interplay between policy signals, capital flows, and market narratives. Powell’s speech ignited the spark, but the true fuel came from institutional entry, short squeezes, ecosystem growth, and the reshaping of narratives. ETH is no longer just an asset — it is evolving into the central stage where financial narratives and capital structures converge. On this stage, policy and markets, narratives and conviction, risks and opportunities will inevitably continue to intersect and unfold.

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