Infini View | The Powell Effect: How Spot ETFs Pulled Crypto into the Macro Arena

Introduction — The Close of an Era, the Opening of a Paradigm

Core metaphor: “Powell’s remarks” vs. “Vitalik’s tweets”

Over the past decade, the pulse of the crypto asset market was driven mainly by events within its own ecosystem. A major Ethereum upgrade, a DeFi protocol innovation, or even a single tweet by a key industry KOL such as Vitalik Buterin could trigger violent swings. This was the age of the “Vitalik Effect,” when pricing was anchored to technology narratives, project milestones, and community sentiment. But this “old paradigm” is fading fast. Today, attention has shifted toward Washington—every speech by Federal Reserve Chair Jerome Powell, every CPI or NFP release carries unprecedented influence that eclipses crypto-native news. This shift—the rise of the “Powell Effect”—is the defining feature of the new paradigm: global macro liquidity is now the dominant force behind crypto pricing.

Central thesis: From edge narrative to macro asset

The approval of U.S. spot BTC/ETH ETFs is the ultimate catalyst. It not only opened compliant channels for trillions in traditional capital but also fundamentally altered the asset attributes of both Bitcoin and Ethereum. Crypto has been formally absorbed into traditional balance sheets—transforming from an isolated alternative market into a macro risk asset that co-moves with equities, bonds, and commodities. This report seeks to systematically verify and decode this irreversible “macrofication,” while providing a new analytical and decision-making framework for investors.

Report structure and research path

We proceed in layers: first, examining structural changes in participants, capital flows, and liquidity; second, decoding how macro indicators—especially Fed policy—transmit to crypto markets; third, discussing the breakdown of legacy valuation models and building a new framework; and finally, analyzing Wall Street’s role, the transfer of pricing power, and offering forward-looking strategies.

Structural Shifts in the Post-ETF Era

A “great rotation” of participants: from geeks to whales

The most visible change post-ETF is the overhaul of participants. A market once dominated by crypto natives and early adopters now welcomes Wall Street whales—large asset managers, hedge funds, sovereign funds, and banks. Since ETF approval, institutions have become the largest buyers of both BTC and ETH. Decision-making has shifted from faith in technical potential to professional macro strategies, risk parity, and quant models. Longer horizons may stabilize volatility, but synchronized institutional de-risking under adverse macro conditions now poses systemic risk.

Rewiring of capital flows: from on-chain to ETF creations

Capital inflows are being rebuilt. Previously, funds entered via CEX fiat gateways or on-chain activity. Now, BTC/ETH ETF creation and redemption has become the dominant channel linking TradFi and crypto. Flows show reallocations not only from gold ETFs but also from tech sector ETFs into BTC and ETH. This institutionalization means marginal capital depends less on crypto community sentiment and more on global asset-allocation decisions. Daily ETF net creations/redemptions are now the market’s most immediate sentiment barometer—outweighing most on-chain metrics.

Liquidity formation evolves: from DEXs to Wall Street market makers

ETF adoption has restructured liquidity. Once centered on offshore exchanges and DEXs, liquidity now concentrates around top Wall Street market makers and APs like Jane Street and Virtu. Their capital and risk-control advantages create deeper ETF liquidity, enhancing efficiency. But this also migrates price discovery from unregulated offshore markets to tightly regulated U.S. venues. By controlling liquidity, Wall Street institutions are quietly seizing pricing power from crypto-native participants.

Transmission Mechanisms of the Macro Shift

Rates and liquidity: the Fed’s faucet effect

The Federal Reserve’s policy is the global liquidity master valve. Rate decisions and balance-sheet operations set the “water level” of markets. Easing expands liquidity, lowers funding costs, and pushes capital into risk assets—BTC and ETH among the most sensitive. Tightening drains liquidity, raising risk-free rates, reducing risk appetite, and triggering outflows. BTC/ETH ETFs now serve as the most direct and efficient transmission channel: institutions can instantly adjust exposure according to Fed signals, transmitting macro liquidity changes almost in real time into crypto prices.

Macro data as the arena of expectations

Macro prints such as CPI and NFP have become crypto’s new “whitepapers.” A hot NFP suggests tighter Fed policy—bearish for risk assets; a soft print fuels rate-cut bets—bullish for BTC and ETH. Price reactions around these releases mirror Nasdaq volatility. The core market game has shifted from “how innovative is this protocol?” to “how will Powell interpret this macro data?”

From decoupling to synchrony

Once, “decoupling” was a beloved crypto narrative. Post-ETF data show the opposite: Bitcoin’s negative correlation with U.S. yields has strengthened, while its positive correlation with Nasdaq has reached historic highs. Ethereum shows a similar pattern. Synchrony with macro assets is the clearest proof of crypto’s absorption into the global financial system.

Asset Repricing in the New Paradigm

The failure of traditional crypto valuation models

Legacy models like Stock-to-Flow (for BTC scarcity) or NVT ratios are losing explanatory power. Institutional flows via ETFs bypass on-chain measurement, making chain-only metrics incomplete. These models fail because they are endogenous and ignore decisive exogenous macro drivers.

Building a new framework: Macro + On-chain + Sentiment

A new pricing model must be multi-dimensional, with macro factors at the core:

1. Global liquidity (M2, central bank balance sheets)

2. Cost of capital (real rates)

3. Risk appetite (VIX, credit spreads) Layered with on-chain metrics (long-term holder activity, ETH staking flows, active addresses) as sentiment checks. Machine learning models may dynamically weight these variables.

Dual attributes: BTC as digital gold, ETH as internet bond

BTC shows duality—risk asset in liquidity booms, safe haven in geopolitical stress. ETH adds another dimension: beyond risk-asset behavior, it increasingly resembles a “tech growth equity” and “internet bond,” its valuation tied to staking yields and network utility. Understanding which role dominates in a given macro regime is critical for allocation.

The Eastward Shift of Pricing Power — Wall Street’s Dimensionality Reduction Strike

From crypto-native exchanges to Wall Street giants

BTC/ETH ETF success represents a quiet transfer of power. Issuers like BlackRock and Fidelity, alongside APs, have overtaken crypto-native exchanges as the largest buyers and liquidity providers. Their scale, regulatory standing, and distribution are a “dimensionality reduction strike,” shifting price control irreversibly toward Wall Street.

Migration of price discovery: from offshore to onshore

Price discovery has migrated. Once led by Binance and other offshore venues, it now anchors around CME’s BTC and ETH futures markets and ETF trading venues. Offshore exchanges may still show volume but have lost influence over pricing.

Wall Street’s rules imported

Wall Street brings complex strategies—basis trades, carry trades—reshaping volatility. Institutional risk frameworks normalize the market. Even U.S. strategic reserves of BTC/ETH have entered policy discussion, signaling possible direct state participation.

Strategies and Risk Management in the New Regime

Core-satellite allocation: BTC and ETH as the anchor

In the new paradigm, the core-satellite model replaces all-in bets. BTC and ETH together should anchor the core: BTC as digital gold, ETH as decentralized compute/internet bond. Altcoins remain satellites—higher risk, linked to innovation, appropriate for tightly managed risk budgets.

Macro timing: listening to Powell’s whistle

Investors must time allocations based on macro signals:

• Falling real rates, weaker USD, liquidity expansion → increase BTC/ETH exposure

• Rising real rates, stronger USD, liquidity tightening → reduce risk or hedge CPI/NFP dates are high-volatility windows, critical for portfolio decisions.

Systemic risk management: from HODL to hedging

“HODL” is insufficient. With BTC/ETH ETFs fully integrated into TradFi, risks now include spillovers from equity crashes and credit crises. Investors must hedge dynamically: buying ETF puts, shorting correlated Nasdaq futures, or using CME futures for protection. Risk management has evolved into cross-market systemic hedging.

Conclusion

The approval of spot BTC/ETH ETFs is not just a funding channel but a paradigm revolution. Pricing power has shifted from the “Vitalik Effect” of community narratives to the “Powell Effect” of macro liquidity and central bank policy. BTC and ETH are completing their rite of passage as macro assets, absorbed into the global financial map.

Wall Street’s entry is more incorporation than embrace. Through capital, compliance, and liquidity, it has rewritten pricing power and the rules of the game. This ends the Wild West era of anonymous coders, KOLs, and offshore exchanges, and ushers in a new phase where crypto’s destiny is entwined with global equities, bonds, FX, and commodities.

Looking forward, financialization will deepen: more derivatives and structured products will emerge. Bitcoin’s digital gold narrative will be tested against traditional havens, while Ethereum must prove its unique value as decentralized compute and internet bonds. For investors, past heuristics may become traps. In a world where Powell’s words matter more than Vitalik’s tweets, success in crypto depends not on chasing the next 100x coin but on navigating liquidity tides, rate cycles, and risk currents. Macro literacy is now the indispensable chart for crossing the cycle.