Bitcoin is still trading relatively flat as investors turn their attention to Jackson Hole in Wyoming, where Federal Reserve Chair Jerome Powell is slated to give a policy speech at the Fed's symposium later today.
Experts say his comments will likely set the tone for September, and that close attention should be paid 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 address, most major cryptocurrencies—not just Bitcoin—are trading relatively flat.
Bitcoin (BTC), the largest cryptocurrency by market capitalization, is down 0.8% at $60,766.48, while Ethereum (ETH), the second-largest, has gained 0.5% to reach $2,654.94, according to data from CoinGecko.
For the crypto market, any surprises in this announcement could have significant implications. A more aggressive rate cut or a dovish outlook, could fuel a strong bullish momentum, as investors seek higher returns in alternative assets. But a less accommodating stance or a hint of future tightening could trigger volatility, potentially leading to a short term dip as investors reassess risk.
Speaking with Decrypt, Ryan Lee, Bitget Research's chief analyst said the market might receive signals of "rate cut confidence" and "data dependence." He expects Powell's message to be similar to recent communications: the Fed is close to cutting rates, but the extent of easing will depend on upcoming data.
"As of now, the market expects a 73.5% probability of a 25 basis point cut or a 26.5% probability 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.
Outlining potential scenarios, Lee said if dovish statements are made, the dollar index is likely to continue falling, the 10-year Treasury yield may keep declining, and the crypto market could gain momentum. Conversely, the opposite may occur.
The central focus of Powell's speech is expected to be the Fed's stance on interest rates, with analysts anticipating that Powell will outline the current state of the economy basis the available datapoints and guidance on what can be expected going forward.
In a note sent to Decrypt, Jag Kooner, Head of Derivatives at Bitfinex said Powell’s speech will be scrutinized for clues about the Fed's rate decisions, especially in light of the significant 818,000 downward revision in US payrolls—the largest since 2009. This revision signals potential labor market weakness that could influence the Fed's approach—and therefore cause some choppy action for Bitcoin.
While a 25 basis point (bps) rate cut in September is widely expected, with the CME Fedwatch Tool currently showing a 73 percent probability of a rate cut in September, the revised job data raises the possibility of a more aggressive 50 bps cut, as the Fed may act to mitigate faster-than-anticipated economic softening.
"Despite the downward revision, the broader economic indicators, such as GDP and jobless claims, suggest the economy is not in the same dire state as during the 2009 recession,” Kooner said. “This mixed data could result in Powell maintaining a cautious tone, emphasizing the Fed's data-dependent stance.”
The crypto community is closely watching for any signals that could influence market sentiment.
Providing context on the potential implications for the crypto market, intergovernmental blockchain expert Anndy Lian told Decrypt that based on the current market sentiments, the expectation of a rate cut is inevitable and is already priced in.
If it happens, it will be the first in over four years. Rate cuts generally make riskier asset classes, including cryptocurrencies and stocks, look more attractive to asset managers.
"I believe 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 crypto, seeking potentially higher returns.”
A rate cut can also weaken the U.S. dollar, which could push investors to seek higher yields elsewhere.
A weaker dollar can make dollar-denominated assets, like Bitcoin, more attractive to international buyers, potentially driving up demand and price, Lian said.
However, if inflation persists despite the rate cut, the Fed might be forced to increase interest rates, resulting in reduced market liquidity and lower investor risk appetite.
Edited by Stacy Elliott.