Looking at the crypto market candlestick charts always feels like a tangled mess, but the underlying logic is actually very clear—Federal Reserve policies and regulatory measures of various countries are the true steering forces.

First, let's talk about the Federal Reserve. Interest rates have a direct and significant impact on the crypto market: when interest rates rise, traditional financial assets (bank deposits, bonds) become more attractive, leading to capital outflows from the crypto space and downward pressure on prices; conversely, when interest rates fall, idle capital needs to find outlets, and high-risk, high-reward crypto assets become very appealing, resulting in capital inflows that push prices higher.

The uncertainty in 2026 lies in the market’s divergent expectations regarding the pace of rate cuts. Some are planning for two cuts, others are optimistic about four, but the January FOMC meeting is most likely to keep the status quo. By March, the probability of rate cuts just surpasses 50%. It’s important to note a trap here—rate cuts do not necessarily mean prices will rise. Last year, in 2025, when rates were cut, the crypto market actually evaporated 400 billion in a single day because investors thought, "Why is the central bank cutting rates? Is there a problem with the economy?" Such shifts in expectations often have a greater impact on the market than the policies themselves.

Regulation is equally a pillar. Recently, the EU and Hong Kong have introduced new rules; non-compliant stablecoins are being delisted from exchanges, but compliant ones are thriving. Moving forward, three points to watch are: the tone and signals from each Federal Reserve meeting, the release of inflation data, and regulatory developments in major economies.

Short-term volatility is inevitable. Don’t panic sell at every dip or chase every rally; it’s wiser to position yourself in advance based on policy expectations.