On August 23rd local time, Federal Reserve Chairman Jerome Powell delivered dovish remarks at the Jackson Hole Central Bank Symposium. The Wall Street Journal described it as "the strongest signal of a rate cut to date." A 25 basis point rate cut in September is almost a foregone conclusion, and the financial markets were instantly "ignited."
At the close of the day, the three major U.S. stock indices all rose, with the S&P, Dow Jones and Nasdaq indices rising 0.98%, 1.02% and 1.97% respectively. Technology stocks such as Tesla and Nvidia led the gains.
According to Bitpush data, after Powell's comments, Bitcoin bulls successfully broke through the $62,000 short resistance level and continued to push it above $64,000 after midday. As of press time, Bitcoin was trading at $64,429, up 6.32% in 24 hours. Ethereum rose more than 5.00% during the day, trading at more than $2,700.
Altcoin were also boosted by Powell’s dovish comments, with all but three of the top 200 tokens by market cap rising. Sun (SUN) was the best performer, up 55.3%, followed by SATS (1000SATS) and Popcat (POPCAT), up 26.2% and 25.8%, respectively. BinaryX was the biggest loser, down 3.1%, while MX Token (MX) fell 0.8% and Helium (HNT) fell 0.7%.
The total cryptocurrency market cap is currently $2.24 trillion, with Bitcoin’s dominance rate at 56%.
"A policy adjustment is now needed," Powell said in his speech. "The trajectory is clear, but the timing and pace of rate cuts will be dictated by incoming data, the changing economic outlook, and the balance of risks."
Market analysts are divided on the extent of the September rate cut. The Chicago Mercantile Exchange's FedWatch tool shows that traders expect a 25 basis point rate cut in September to be 100%, and the probability of a 50 basis point cut has climbed to more than 36%.
Rate cuts are good for risk assets
Investors have been waiting for a rate cut since the start of 2024.
John Haar, managing director of Swan Bitcoin, said: "Historical trends show that the Fed's rate cuts are typically in response to underlying problems in the markets or the economy, which typically leads to market adjustments or recessions, but this time is different. Various market segments have been protected from the impact of higher interest rates: businesses that borrowed heavily at historic lows in 2020 and 2021, homeowners with long-term fixed-rate mortgages during the same period, and banks that used the BTFP program to ease rate hikes."
“In addition, the federal government is engaging in deficit spending at levels similar to those seen during the recession, effectively pre-stimulating the economy,” he explained. “So far, stocks are up slightly, Treasury yields are lower, and Bitcoin is up sharply. Personally, I expect assets such as US stocks, real estate, gold, and Bitcoin to perform well over the next 6-12 months based on Fed rate cuts, consumer price inflation easing gradually and not falling below 2%, no clear recession, continued large-scale federal spending, and the Fed’s plan to increase its balance sheet again in 2025.”
“Generally speaking, rate cuts bode well for risk assets, which historically have seen investor appetite expand as borrowing costs fall,” said Leena ElDeeb, research assistant at 21Shares .
Leena ElDeeb analyzed : "The last time the Fed cut interest rates was to counter the impact of the epidemic in March 2020, when they cut interest rates by 150 basis points (bps) to close to zero. By the end of the year, the total market value of cryptocurrencies had increased by about 450%, while the price of Bitcoin soared by 200% in the same period. Although the Federal Reserve is expected to cut interest rates by 25-50 basis points in September, historical trends can serve as some reference for the sensitivity of crypto prices."
ElDeeb highlighted in the report : “Besides rate cuts, another major catalyst for Bitcoin’s breakout is global central bank liquidity, measured as M2, with Bitcoin typically hitting its lowest point a few months before global M2 money supply bottoms out. Bitcoin’s price then rapidly surges, typically outpacing liquidity growth, followed by a mid-cycle correction as markets recalibrate. Last week, the Fed added $2 billion to its balance sheet. While past performance is not indicative of future prices, the presence of a Bitcoin spot exchange-traded fund (ETF) in the world’s largest financial market is a key catalyst in this scenario.”
Michaël van de Poppe, founder and CEO of trading firm MNTrading, said in an analysis on its X platform that once BTC breaks through $62,000, it will be a "signal for the market to continue to rise."
Ki Young Ju, founder and CEO of CryptoQuant , said in a tweet that historical data shows that the second stage of the bull market after Bitcoin halving usually begins in the fourth quarter. He expects the same to be the case this time, saying: "Compared with the same period last year, whale will not let the fourth quarter be so boring."
Author: BitpushNews Mary Liu
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