Fed Ends 2020 Inflation Framework; Crypto Volatility Looms Amid Stock Rally
On August 22, 2025, the Federal Reserve officially ended its 2020 flexible average inflation targeting framework at the Jackson Hole symposium, reverting to a pre-2020 policy posture with tighter inflation control and sustained higher interest rates. The pivot triggered broad equity rallies as traders anticipated clearer rate management, while raising the likelihood of elevated short-term crypto volatility. Historically, major Fed policy shifts have led to double-digit intraday moves in Bitcoin and Ethereum, highlighting increased risk for digital assets. Investors are advised to shorten duration exposure, employ protective options strategies, and rebalance portfolios to reflect heightened interest-rate sensitivity. Monitoring on-chain exchange flows and stablecoin supply can provide early liquidity signals, while basing tactical moves on Fed minutes and official communications is critical. As the Fed’s Jackson Hole pivot reshapes rate expectations, crypto traders should prepare for rapid repricing and maintain liquidity management strategies to navigate potential swings in Bitcoin, Ethereum and other digital assets.
Bearish
The Fed’s decision to end its 2020 flexible average inflation targeting marks a shift toward tighter monetary policy and higher interest-rate sensitivity for risk assets. Historically, U.S. rate-hike cycles and major Fed framework changes have pressured cryptocurrencies, triggering sharp intraday moves and overall downtrends. While equities have rallied on the clarity of rate management, crypto markets typically see amplified volatility and downward repricing when liquidity tightens. In the short term, traders should expect rapid swings in Bitcoin and Ethereum as markets adjust to new rate expectations. Over the long term, sustained higher rates may constrain capital flows into digital assets, reinforcing a bearish outlook until clear signs of inflation stabilization emerge.