Alpha Report: The Powell Pivot & The Crypto Shakeout

September 28, 2025

The market has received the signal it was waiting for. Fed Chair Powell’s pivot is no longer a matter of speculation; it is now the base case. His explicit concern over the "downside risks to employment" confirms a monumental shift in priority from inflation to the labor market. First-level thinking sees this as a green light for all risk assets. Second-level thinking, however, requires us to ask a more nuanced question: in a world where a Fed pivot was already anticipated, what happens next?

As we noted in our September 11th report, the market has been undergoing a "hidden correction" through time, not price, engineered by suppressed volatility. That period of quiet consolidation, driven by the certainty of a Fed backstop, has now been met with the official dovish signal. The market is now pricing in an 86.6% probability of a 25bps cut on October 29th and a 62% chance of another in December. While this provides a tailwind for equities in the short term, it creates a complex and puzzling environment for digital assets and forces us to refine our strategic stance with precision.

The 3 min Alpha Brief: Our Updated Base Case

• The Big Picture: The Fed's pivot is now confirmed and is the central driver of the macro landscape. Powell has made his choice: he will sacrifice the 2% inflation target to protect the labor market. While the headline 3.8% GDP print appeared strong, it masked underlying cracks in the economy, from weakening PMIs to a broad slowdown in key employment sectors. This gives the Fed all the cover it needs to initiate an easing cycle. Our base case, outlined in early September, of a market supported by the anticipation of cuts has now transitioned to a market reacting to the reality of them.