This article discusses how the latest speech by Fed Chairman Jerome Powell did not cause a drop in cryptocurrency prices, unlike in the past.
We have grown accustomed to the reality that when Fed Chairman Jerome Powell spoke, cryptocurrency prices fell. But this time is different, as we will describe in the article.
The choice of the Fed Chairman Jerome Powell
The Fed first announced a further rate increase of 25 basis points. The announcement had no impact on the markets because it was well expected.
However, it was made abundantly clear in the official press release that there would be no bad news in the announcement.
In actuality, nothing in the publication makes a plausible argument that things might turn out to be worse than anticipated.
Markets focus on the future rather than the past. They are most frightened by sudden unpleasant news.
Because if the markets discount anticipated future concerns as soon as they become aware of them, they won’t affect the financial markets when they do.
Since the markets had already disregarded the Fed’s harsh comments, the markets did not react badly.
Fed: The Influence of Jerome Powell’s Comments on Crypto
The Fed’s chairman’s news conference statements often influence markets more than interest rate adjustments or the Fed’s press release.
Yesterday, Fed Chairman Jerome Powell said nothing new, therefore the markets did not react negatively to his words.
In fact, the price of bitcoin started to increase around two hours after the meeting ended.
Perhaps the cryptocurrency markets responded favorably because Powell said so little that was novel or unexpected.
The Nasdaq, among other things, dropped 1.4 percent since the news conference began and finished the day at -0.4 percent.
Powell’s speech also saw a 1.3 percent decline in the S&P500 index, therefore the cryptocurrency markets responded favorably in contrast to the traditional markets.
Market Response to Jerome Powell, Chairman of the Federal Reserve
Cryptocurrency markets recovered after US stock exchanges closed. Thus, Powell’s remarks crashed the U.S. exchanges, hurting bitcoin markets.
The cryptocurrency markets were no longer affected by their downward trend once the U.S. exchanges had shut down. The markets were able to react favorably to the Fed Chairman’s mostly expected comments during the news conference.
Bitcoin’s dominance yesterday started to decline before the rate hike amount was released and continued until Powell’s press conference was almost over.
Over the next two hours, it bounced back once Powell finished speaking and eventually reached its pre-decision level.
This degree of dominance is higher than the 2022 highs and very near to the 2023 highs. One have to look back to July 2021, the height of the speculative bubble, to discover previous levels that were comparable.
The price of gold, on the other hand, also rose Wednesday, reaching a new high for the year 2023 at $2,081 per ounce before falling just short of $2,040. This is really close to record highs.
Causes of the increase
Last night’s Powell remarks were expected, so the markets weren’t surprised.
Even while he claimed that the situation was under control, it is far from ideal.
Thus, gold rose while U.S. stocks fell slightly but significantly.
In expectations of brighter times, many investors move some of their money from risk-on assets like shares to risk-off assets like gold.
Bitcoin’s approximately 3% market value growth suggests that some investors view it as a “middle ground” alternative to gold.
Bitcoin is riskier than gold, but it competes with central banks’ broad monetary policies.
It is conceivable that the Fed will resume printing money in the future given that the U.S. economy is currently experiencing some turbulence.
Additionally, given the financial crisis, keeping some of one’s funds in Bitcoin on a non-custodial wallet may be a better option than keeping cash in a bank.
The second significant gain in bitcoin price for 2019 occurred at the start of March, which, when added to the previous factors, completely supports yesterday’s surge.