In summary
- Bitcoin price remains stable as investors await Jerome Powell’s speech at the Fed symposium in Jackson Hole, Wyoming.
- Experts say Powell’s comments will likely set the tone for September, with particular attention being paid to the interpretation of market data and any hints about future rate cuts.
- Bitcoin is down 0.8% at $60,766 and Ethereum is up 0.5% at $2,654.94, according to data from CoinGecko, as investors await signals from the Fed.
Bitcoin price remains stable as investors turn their attention to Jackson Hole in Wyoming, where Federal Reserve Chairman Jerome Powell is scheduled to give a policy speech at the Fed symposium later today.
Experts say his comments will likely set the tone for September, with close attention to Powell’s interpretation of market data and any hints about the scale and timing of future cuts.
In the hours leading up to Powell’s speech, most major cryptocurrencies, not just Bitcoin, are holding relatively steady.
Bitcoin (BTC), the largest Cryptocurrency by market cap, is down 0.8% to $60,766, while Ethereum (ETH), the second-largest, is up 0.5% to trade at $2,654.94, according to data from CoinGecko.
For the cryptocurrency market, any surprises in this announcement could have significant implications. A more aggressive rate cut or dovish outlook could fuel strong bullish momentum as investors seek higher returns in alternative assets. But a less accommodative stance or a hint of future adjustments could trigger volatility, potentially leading to a short-term decline as investors reassess risk.
Speaking to Decrypt, Ryan Lee, chief analyst at Bitget Research, said the market could be receiving signals of “rate cut confidence” and “data dependence.” Lee expects Powell’s message to be similar to recent communications: the Fed is close to cutting rates, but the magnitude of easing will depend on upcoming data.
“Right now, the market is expecting a 73.5% chance of a 25 basis point cut or a 26.5% chance of a 50 basis point cut in September. The 10-year Treasury yield is around 3.85%, and the US Dollar Index is at 101.44,” Lee said.
Highlighting possible scenarios, Lee said that if dovish statements are made, the dollar index is likely to continue falling, the 10-year Treasury bond yield may continue to decline, and the cryptocurrency market could gain momentum. On the contrary, the opposite could happen.
The focus of Powell’s speech is expected to be the Fed’s stance on interest rates. Analysts expect Powell to address the current economic situation based on available data and offer insights into future expectations.
In a note sent to Decrypt, Jag Kooner, Head of Derivatives at Bitfinex, said that Powell’s speech will be scrutinized for clues regarding the Fed’s rate decisions, especially in light of the significant downward revision of 818,000 in US payrolls, the largest since 2009. This revision signals potential weakness in the labor market that could influence the Fed’s approach and therefore cause some volatile action in Bitcoin.
While a 25 basis point (bps) rate cut is widely expected in September, with the CME Fedwatch Tool currently showing a 73% probability of a September rate cut, the revised jobs data raises the possibility of a more aggressive 50 bps cut as the Fed may act to mitigate a faster-than-anticipated economic weakening.
Source: CME FedWatch Tool
“Despite the downward revision, broader economic indicators such as GDP and jobless claims suggest the economy is not in the same dire state it was during the 2009 recession,” Kooner said. “These mixed data could lead Powell to maintain a cautious tone, emphasizing the Fed’s data-dependent stance.”
The crypto community is closely watching any signals that could influence market sentiment.
Providing context on the potential implications for the cryptocurrency market, intergovernmental Blockchain expert Anndy Lian told Decrypt that based on current market sentiments, the expectation of a rate cut is inevitable and already priced in.
If it happens, it will be the first in more than four years. Rate cuts typically make riskier asset classes, including cryptocurrencies and stocks, more attractive to asset managers.
“I think there will be an increase in liquidity. This happens because lower interest rates encourage borrowing and spending, putting more money into circulation,” Lian said. “Some of this liquidity tends to flow into riskier assets like cryptocurrencies, potentially seeking higher returns.”
A rate cut may also weaken the US dollar, which could lead investors to seek higher yields elsewhere.
A weaker dollar can make dollar-denominated assets such as Bitcoin more attractive to international buyers, potentially boosting demand and price, Lian said.
However, if inflation persists despite the rate cut, the Federal Reserve could be forced to raise interest rates, resulting in less liquidity in the market and lower risk appetite among investors.
Edited by Stacy Elliott.
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