A solid down day in crypto is about to take a dive after the Federal Reserve chairman’s unexpected hawkish remarks at his post-policy meeting press conference.
“A rate cut in December is far from a foregone conclusion,” Powell said in his opening remarks. It was a shock to markets, which had priced in a 90% chance of another rate cut at the Fed’s last meeting this year.
The effect in prices was immediate, with bitcoin down about $2K to the current $109,600, now down 5% over the last 24 hours and largely giving up its big gains from earlier this week.
Stocks also fell after Powell’s remarks, going from a modest gain for the day to a modest loss. The 10-year Treasury yield is now up 8% basis points to 4.06% and the dollar is climbing higher. The odds of a rate cut in December have fallen to just 69% from 90% previously, according to CME FedWatch.
Whether Powell is just putting out a hard line — as Fed officials often do — or whether he truly believes the central bank will return to wait-and-see mode remains to be seen.
Minutes earlier, as expected, the central bank had cut its benchmark interest rate by 25 basis points to 3.75%-4.0%. However, the cut was a bit hawkish, if possible, with Kansas City Fed chief Jeffrey Schmid breaking with his colleagues and voting to keep policy steady.
The ongoing government shutdown and economic data blackout puts the central bank in a tough spot, with policymakers remaining wary of signaling further cuts that could trigger volatility in risk assets, said Marcin Kazmierczak, co-founder of oracle network RedStone.
“The shutdown’s data blackout means subsequent Fed moves are now unpredictable, which is what markets hate the most,” he said in an email. “This uncertainty likely means bitcoin and broader crypto volatility through the end of the year.”
Paul Howard, director of crypto trading firm Wincent, noted that BTC is still trying to hold the $110,000-$120,000 range, but concerns about a further cut potentially not happening have moved prices slightly lower.
“My sense is that this is convenient for short-term accumulation and we will see macro improvements heading into November, which will lead to risk assets before consolidation at the end of the year,” he added.
