Sophia’s Thoughts on Cuts Without Contraction
Jerome Powell’s Jackson Hole speech marked a turning point. He signaled that rate cuts are likely ahead, reshaping markets and setting the stage for crypto’s next move.
These are Sophia's Thoughts:
A soft August jobs report has markets pricing in rate cuts, with gold and Treasuries signaling that liquidity is preparing to shift into risk.
From Nasdaq’s tokenization filing to corporate treasuries piling into Solana and Worldcoin, institutions are embedding blockchain into their balance sheets.
With CPI and the Fed decision looming, the question is how quickly dovish liquidity will translate into deeper institutional rails and structural tokenization.
🚀 Last week’s market performance
The crypto market climbed 2.9% this week, with Bitcoin (BTC) up 2.6% as sentiment firmed. Zcash (ZEC) led the way, surging 25.3% after a protocol upgrade sparked renewed interest. On the weaker side, Cronos (CRO) slipped 6.8%, cooling off after its 50%+ rally the week prior.
🧐 What is your crypto mood today?
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✂️ Cuts Without Contraction?
The August jobs report landed with a thud. The U.S. economy added just 22,000 nonfarm payrolls, well short of the 75,000 forecast. At the same time, unemployment ticked up to 4.3%, its highest since 2021. Markets read these numbers as a green light for the Fed to accelerate easing.
Rate expectations snapped into place: the CME FedWatch now implies a 91.8% probability of a 25 bps cut at the September 17 FOMC meeting, with a 8.2% tail risk of a jumbo 50 bps move. That tail risk has climbed quickly, up from 0% before the jobs release a week ago. Prediction markets like Polymarket mirror the same odds. Even Standard Chartered flagged the possibility of 50 bps, citing that the labor market has shifted over the past month and that "August labor market data has paved the way for a 'catch-up' 50 basis point rate cut at the September FOMC meeting, similar to what occurred at this time last year."
Risk assets are treading carefully. The S&P 500 is up 1.2% week-to-date, near record highs, but whispers of a “sell the news” pullback are circulating. Meanwhile, gold has surged to over USD 3,600/oz, a new all-time high, while the dollar has softened. Yields followed the script, with the 10-year Treasury slipping to 3.85%.
🚧 Behind the Curtain: Treasuries & Tokenization
While markets debate whether the Fed cuts 25 or 50bps, institutions are already wiring the next rails. The focus isn’t just on policy, it’s on infrastructure that makes volatility an opportunity, not a risk.
On September 8, Nasdaq filed SR-NASDAQ-2025-072, proposing to list and settle tokenized securities, including equities and ETFs, through its primary exchange. Unlike niche pilots, this proposal plugs directly into existing systems: investors would still trade under NBBO pricing (ensuring the best available bid and offer), market surveillance would remain unchanged, and settlement would run through DTC on T+1. In practice, tokenized and traditional assets would move through the same pipes, indistinguishable in market plumbing.
To underscore the pivot, Nasdaq also committed $50 million into Gemini’s upcoming IPO. Gemini, in turn, is already live in the EU with tokenized stock trading via Dinari, starting with MicroStrategy and Broadcom. Since July, volumes have topped USD 50M+ in tokenized trades.
The treasury playbook is shifting too. Forward Industries raised USD 1.65B through a Solana-focused private placement in private equity, the largest allocation yet, with backing from Galaxy Digital, Jump, and Multicoin. DeFi Development Corp has been equally aggressive, scaling its holdings to 2.027M SOL (~USD 410M) after adding USD 117M in just eight days.
Together, these moves show a broader pattern: exchanges are tokenizing equities, corporates are betting treasuries on Solana and identity tokens, and institutions are building liquidity buffers designed to outlast the chop.
🔜 What’s Next? Policy & Capital Flows
The institutional shift toward tokenization and on-chain treasuries is still in its early stages, but the coming weeks will provide important signals on how quickly adoption can scale. Nasdaq’s filing sets the stage for tokenized securities to trade alongside traditional equities without creating parallel markets. Nasdaq expects that, pending SEC approval, the first tokenized trade will take place by Q3 2026.
Macro data will be the short-term driver. August CPI lands on September 11, with consensus at +0.2% month-over-month. A soft print would likely cement a 25 bps cut, while a hotter read could work against current rate cut expectations. The FOMC decision on September 17 would then mark the first cut of this easing cycle.
But history warns against assuming cuts are bullish. Since 1980, stocks have traded lower one month after a Fed cut 40% of the time, and nearly a third of the time they were still lower after a year. The difference comes down to context: cuts alongside steady growth tend to lift equities, while cuts into weakness often signal trouble ahead. That nuance is front of mind after August’s disappointing jobs report, which boosted cut odds but also revived recession concerns.
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