New Huo Institute said the latest U.S. data point to an economy that is not facing a broad-based demand slump, but rather a mix of cooling employment conditions and resilience in consumption and AI capital spending. In the institute’s view, that leaves the Federal Reserve without much room to pivot quickly toward easing, while the next move in crypto assets will depend more on whether short-end rates and inflation data show real weakness.
Inflation and private demand remain firm
U.S. July PCE inflation rose 0.2% month on month and held at 3.7% year on year. Core PCE also increased 0.2% from the previous month, with the annual rate at 3.3%, still some distance from the Fed’s 2% target.
At the same time, second-quarter GDP growth stayed at a 1.5% annualized rate, but New Huo Institute said private demand looked stronger than the headline GDP figure suggested. Personal consumption growth was revised up from 3.2% to 3.4%, private domestic final purchases were revised up to 4.2%, corporate profits increased by $400.9 billion in a single quarter, the second-largest quarterly gain on record, and initial jobless claims fell further to 203,000.
The institute said those figures do not support what it called the simple narrative that the U.S. economy is broadly stalling.
Warsh’s Jackson Hole speech drew close attention
New Huo Institute said Kevin Warsh’s speech at Jackson Hole was especially important because it offered the first relatively complete explanation of his monetary policy framework.
According to the institute’s account, Warsh said forward guidance in normal times should be very limited. The Fed, he argued, should not keep signaling a future rate path in a way that encourages markets to trade around central bank messaging, and policymakers need to recover market signals that are less distorted.
Warsh also opposed a mechanical application of the Taylor Rule and warned against overreacting to any single data point, instead stressing the need to focus on data trends.
He also reiterated that 2% is a fixed inflation target, that short-term interest rates should remain the main monetary policy tool, and that balance-sheet policy should be used cautiously and only in times of crisis. In New Huo Institute’s reading, that means quantitative easing will not become a routine demand-management tool. As long as inflation is not falling fast enough to confirm a return to 2%, the Fed still has work to do, and markets cannot rule out a longer period of high rates or even a renewed repricing of rate hikes.
A different reaction function could alter volatility patterns
New Huo Institute said the significance of this shift is not limited to whether the next move is a hike. The more important point, it said, is that the Fed’s reaction function itself may be changing.
If persistent forward guidance is reduced, policy expectations may no longer be adjusted gradually through speeches by officials. Instead, rate volatility could take on a structure of lower volatility in normal periods and sharper event-driven bursts on major data days. For FICC and crypto assets, short-end rates would more directly reflect the Fed’s reaction function. Meanwhile, 10-year and 30-year U.S. Treasuries would more independently reflect fiscal supply, the neutral rate shaped by AI investment, and changes in term premium.
The institute said the market should no longer treat the entire Treasury curve as a single monetary policy trade.
Crypto may be more sensitive to the short end
That point is especially important for crypto markets, New Huo Institute said. In a phase where overall liquidity has not expanded materially and crowding in core assets has not fully broken apart, crypto may be more sensitive to short-term rates than to long-dated yields.
The institute said the market is now assigning greater weight to short-end hike risk. Investors, it added, should be alert to the fact that even if Bitcoin’s long-term fiat debasement hedge narrative remains intact, short-term valuations may still come under direct pressure from policy rates and U.S. dollar liquidity.
Recent crypto trading has been divided
New Huo Institute said that framework helps explain the recent split in crypto market behavior.
Around Aug. 24, the U.S. Treasury moved ahead with new sanctions on Iran, bringing digital assets, gold and shipping into a broader sanctions scope. Even so, the impact of geopolitical headlines on spot BTC pricing has been weakening, and Bitcoin at one point moved above $80,000.
At the same time, market sentiment briefly reached extreme greed, with the Fear and Greed Index touching 80 in midweek. BTC ETFs recorded a single-day net outflow of $202 million on Aug. 28, ending a nine-day streak of inflows, but net inflows for August still reached $925 million, the highest monthly total so far this year. The Coinbase Premium Index also turned positive on Aug. 24, ending a 97-day period of negative premium.
Key dates over the next 30 days
Looking ahead, New Huo Institute said the market will focus over the next 30 days on the Sept. 15-16 Federal Open Market Committee meeting and dot plot, along with the Sept. 4 nonfarm payrolls report and the Sept. 11 CPI release.
If inflation or employment data come in strong again, rate-hike pricing may continue. If the numbers weaken, markets may trade a hawkish peak, giving risk assets room to rebound.
The institute also said whether BTC can hold above the $80,000 to $81,300 resistance zone will depend on whether ETF flows return to net inflows and whether spot demand can absorb supply. On the technical side, about $78,000 and $75,200 mark support near EMA7 and EMA15, while RSI14 is around 74, indicating overheated short-term momentum. In its view, the market is more likely to enter a range than move straight into a one-way rally.
New Huo Institute also included a disclaimer, saying markets carry risk, investment requires caution, and the article does not constitute investment advice. Users should consider whether any opinion, view, or conclusion in the article fits their own circumstances, and bear responsibility for investment decisions made on that basis.