At the end of 2025, the Federal Reserve announced a pause in interest rate hikes, concluding the previous tightening cycle. With a consensus that "the rate cut cycle is approaching," the market unhesitatingly placed higher valuations and more aggressive narratives on high-volatility assets such as technology stocks and Bitcoin. However, as 2026 began, inflation data fluctuated in the first half of the year. Although the June CPI showed some slowdown, it remained above the 2% target, planting the seeds for a shift in policy tone. The real turning point came on July 17: Vice Chair Jefferson stated plainly, "If inflation does not cool down quickly, the Fed should consider raising interest rates." On the same day, Logan further asserted that the mild data from June was insufficient to prove inflation was back on the path to the 2% target, publicly advocating for "a moderate increase in interest rates," becoming the first official since Walsh took office to clearly call for a rate hike. These two hawkish statements brought an interest rate that was initially considered to be "only lower from here" back to the discussion table for rate hikes, shifting core macro variables from "easing ahead" to suddenly considering "another tightening is not impossible." Almost simultaneously, TSMC reported a high gross margin of 67.7% for the second quarter and raised its capital expenditure guidance to about 600. This should have reinforced the narrative of prosperity in AI chips and computing infrastructure, but according to BIT (bit.com), it played out in the market as “the stronger the fundamentals, the heavier the selling pressure”: the more impressive the performance, the more aggressively the chips were sold off. Under the backdrop of rising rate hike expectations, high-valuation, heavy-investment technology stocks became the first assets to be reduced in the portfolios. This resonance of “hawkish return + technology stock benefits turning into headwinds” points to the same change — the repricing of rate hike expectations and the adjustment of the risk-free return are pressing the cooling button on the valuations of all high-growth, high-volatility assets. Therefore, in this round of risk preference cooling, how BTC, seen as a vehicle for inflation and monetary environment narratives, and ETH, more closely bound to technology and smart contract ecosystems, will be repriced, and how on-chain funds will adjust positions between dollar-denominated assets, yield-bearing protocols, and highly volatile coins, is the key question that must be addressed next.
Hawkish Voices Escalate: Shadows of Rate Hikes Loom Over Risk Assets
Since the end of 2025 when the Federal Reserve announced a pause in interest rate hikes, the market had attempted to understand this “phase-end” as the starting point for future rate cut cycles: options pricing, duration allocation, and risk exposure in technology stocks and cryptocurrency assets all revolved around the optimistic narrative that “rates will only be lower, and liquidity will only be looser.” However, as 2026 progressed into the first half, U.S. inflation data began to fluctuate. Although the June CPI showed some slowdown, it remained above the 2% inflation target, and the previously smooth path of “pause → rate cut” was embedded with new uncertainties. By July 17, Vice Chair Jefferson publicly stated, “If inflation does not cool down quickly, the Fed should consider raising interest rates.” On the same day, Logan further noted, “The June CPI slowdown is insufficient to be confident that inflation is back on the path to the 2% target... A moderate increase in interest rates will help better achieve the inflation target.” The combination of these two hawkish signals marked a subtle shift in policy tone from “patient observation” to “re-discussing rate hikes.”
The repricing of rate hike expectations quickly unfolded: once the market started to factor in the probability of “another rate hike,” the center of no-risk returns needed to be adjusted upwards, and the discount rate for future cash flows was simultaneously raised. The valuation premiums enjoyed by high-growth, high-volatility assets over the past two years were rapidly compressed. Technology stocks and cryptocurrencies, typical long-duration and story-heavy assets, faced a steeper discount curve on the modeling side while encountering the reality that holding cash or short-term bonds became more attractive on the trading side. When the consensus of “soon starting a rate cut cycle” was broken by the speeches of Jefferson and Logan, the cooling of risk preferences typically evolved along the same path: leverage positions shrank, high-beta sectors were prioritized for reduction, liquidity flowed out of high-valuation assets like technology stocks and cryptocurrencies, and turned towards categories with visible returns and lower interest rate sensitivity. This path is laying a cooler macro backdrop for the pricing environment of BTC, ETH, and a broader range of risk assets.
TSMC Earnings Shift from Positive to Negative: AI Narrative Questioned
At the same time that hawkish signals from the Fed raised discount rate expectations, TSMC, a global core supplier of AI computing power, delivered a nearly "textbook" beautiful earnings report: with a gross margin of 67.7% in the second quarter, it continued to prove the strong profitability of AI-related chips and foundry services. Meanwhile, the company raised its capital expenditure guidance to about 600, interpreted as a strong bet on the long-term prosperity of computing power and AI infrastructure. According to past conventions, such a combination should have ignited risk preferences in the semiconductor and technology sectors. However, according to BIT (bit.com), TSMC’s robust performance did not drive the sector upwards, but instead manifested as accelerated selling pressure in the market, leading to the unusual phenomenon of “the stronger the fundamentals, the heavier the selling pressure.”
What was being recalibrated behind this was actually a macro variable: time. Higher capital expenditure means longer investment payback periods, and in an environment where interest rates may rise again and discount rates are elevated, any high-growth pathway that requires years to realize cash flows must accept valuation restructuring. AI infrastructure is no longer just "an unlimited growth story," but is pulled back into cash flow discount models, with investors beginning to demand higher return rates and shorter payback periods; thus, a defensive stance is taken towards high-valuation, heavy-investment technology stocks. This shift from positive to negative in the technology sector's narrative has spilled over into the emotional atmosphere surrounding crypto assets: BTC and ETH, also high-growth narrative assets, are repriced on the basis of "long-term, high-volatility assets." The former, serving as a tool betting on monetary easing expectations, naturally faces valuation space compression as rate hike expectations heat up and the rate cut narrative weakens. The latter, closely bound to technology applications and the smart contract ecosystem, is more directly incorporated into the overall discounting of growth stocks. As a result, on-chain funds began to gradually withdraw from high-volatility coins, moving towards dollar-denominated assets and yield-bearing DeFi products. The “AI return cycle reassessment” triggered by TSMC’s earnings report is directly reshaping the pricing position of BTC and ETH within the entire spectrum of risk assets through both discount rates and risk preferences.
Moment of Rising Rates: On-Chain Funds Shift from Offense to Defense
When Jefferson and Logan threw out signals of “considering rate hikes if necessary” and “moderately raising interest rates” on July 17, the first thing that was fundamentally changed was the asset managers’ balance sheets — rising short-term interest rates and traditional money market tool returns made technology stocks, which had been boosted by AI and growth stories over the past year, the first chips to be "reduced" in portfolios. TSMC’s gross margin of 67.7% and increased capital guidance should have reinforced the prosperity of computing power. Still, in an environment where discount rates suddenly rose, it triggered the phenomenon of “the stronger the fundamentals, the heavier the selling pressure,” leading funds to withdraw from overvalued tech stocks, revert to cash, short bonds, and cash-like assets, and extend along the same risk spectrum into crypto assets, systematically shrinking exposure to high-volatility beta assets like BTC and ETH.
During this phase of strengthening rate hike expectations, the behavioral patterns of on-chain funds typically shift: from pursuing price elastic long-duration assets to more predictable yield, shorter-duration dollar-denominated assets and money market-like DeFi products. High-volatility coins are often used more for hedging or shorting rather than leveraging aggressively. Historical evidence shows that when rate hike expectations suddenly rise, BTC and ETH often face rising financing costs and cooling leverage, reflected in reduced positions in high-leverage contracts, a higher proportion of funds preferring fixed-income-type products, and a periodic increase in dollar assets' share of total on-chain market value; these are all clear signs of macro funds transitioning from "offense" to "defense."
BTC and ETH: Struggling for Survival Between High Rates and AI Revaluation
As rate expectations suddenly shift upward and on-chain funds move from "offense" to "defense," the fates of BTC and ETH begin to diverge. BTC has habitually been categorized in the asset pool of “hedging inflation, hedging monetary easing expectations” during previous macro cycles. When Jefferson and Logan signaled a return to rate hikes in mid-July 2026, leading the market to believe that high rates might be here for a longer period, the "digital gold" narrative did not entirely collapse. However, the portion of premium benefiting from easing expectations was systematically squeezed out. Uncontrolled inflation, combined with the risk of rising rates, means holding BTC resembles a medium-term insurance against policy mistakes and monetary credibility, rather than leveraging to chase the unified risk asset rally driven by rate cuts. Its pricing is more incorporated into the relative value framework of gold and long-duration defensive assets, rather than purely fluctuating with the emotions of tech stocks.
ETH and other assets centered around smart contracts, public chain performance, and computing narratives are more directly exposed to the reassessment of "technology + AI" as a basket of risk assets. TSMC's reported gross margin of 67.7% and increased capital expenditure guidance to about 600 should have strengthened AI infrastructure prosperity but, in the context of BIT (bit.com) reporting, triggered the phenomenon of “the stronger the fundamentals, the heavier the selling pressure” in tech stocks. This implies that as rate hike expectations rise and discount rates increase, the market begins to reassess the return cycles of all assets touting high growth and high investment, naturally bringing ETH into this screening standard. The result is a compression of directional long beta exposure to BTC and ETH, with professional funds preferring to position in short-term contracts, implied volatility of options, and cross-asset spreads — for example, analyzing relative strength between BTC and ETH, or the convergence and divergence of correlations between equity indices and mainstream coins — while on-chain allocations quickly shift between dollar-denominated assets, fixed-income-like DeFi, and high-volatility coins. In this macro and industry pinch, BTC relies on the "hedging" narrative to attract defensive retentions of existing funds, while ETH and "on-chain technology narrative assets" are forced to accept valuation restructuring under higher discount rates and new trading structures centered around volatility.
What to Watch Next: The On-Chain Transmission from FOMC to Chip Earnings
In the coming months, the trajectory that truly determines interest rates and risk preferences will be a complete chain from the FOMC to macro data to AI and chip earnings. The story of the Fed pausing interest rate hikes at the end of 2025 and the market queuing up for rate cuts has been rewritten by repeated inflation data in the first half of 2026 and a June CPI still above the 2% target. Jefferson and Logan's hawkish statements on July 17 set the tone for future meetings, suggesting that “discussions about rate hikes could be resumed at any time.” The interest rate expectation curve will continuously be redrawn around each unexpected CPI and employment data release. Meanwhile, TSMC's second-quarter gross margin of 67.7% and increased capital expenditure guidance to about 600, combined with its unusual market condition of "the better the performance, the heavier the selling pressure," will continue to test the market's tolerance for "high growth + heavy investment" assets. If technology stocks continue to take a defensive route in the context of rising interest rates, it will be difficult for crypto assets to independently maintain high-risk premiums. For crypto participants, three types of indicators need to be focused on: first, interest rate expectations — how the FOMC statements, officials' remarks, and monthly inflation and employment data might influence the mainstream probability of “another rate hike”; second, the strength of correlations between tech stocks and BTC, ETH — whether weakness in semiconductor and AI leaders will continue to raise crypto's beta and trigger passive deleveraging; third, the structure of on-chain funds — the rebalancing of funds between dollar-denominated assets, fixed-income-like DeFi, and high-volatility coins, as well as collective signaling of leveraged positions in mainstream coin contracts. The baseline assumption in the current scenario is that interest rate expectations hover at high levels, risk preferences cool, with BTC playing more of a “macro hedge” and low beta positions, while ETH and other tech narrative assets are pressured by higher discount rates, and on-chain funds trend towards defense. The extreme scenarios to be wary of include persistently stubborn inflation forcing the Fed to restart rate hikes, generating liquidity shocks that lead to deleveraging in both tech stocks and crypto, or unexpectedly rapid declines in inflation prompting a policy shift to dovish, thereby quickly redirecting funds back into ETH and high-volatility sectors, significantly lifting overall market volatility. In such scenarios, whether the pricing focus of BTC and ETH shifts towards defense or offense will depend on the slope of the interest rate expectation curve, the interconnectivity of tech stocks and on-chain fund structures, and the ultimate positioning of funds between defense and offense.
Join our community to discuss and become stronger together!
AiCoin exclusive Hyperliquid benefits: https://app.hyperliquid.xyz/join/AICOIN88
AiCoin exclusive Aster benefits: https://www.asterdex.com/zh-CN/referral/9C50e2
On-chain Telegram community: https://t.me/AiCoinWhaleData
On-chain community: https://www.aicoin.com/link/chat?cid=N6OVMor5g
AiCoin on-chain Twitter: https://x.com/aicoinwhaledata
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
