A significant downturn in crypto has escalated into a steep decline following unexpected hawkish comments from Federal Reserve Chairman during his post-policy meeting press conference.
“A rate cut in December is not guaranteed,” Powell stated in his opening remarks, which surprised the markets that had anticipated a 90% chance of another rate cut at the Fed’s final gathering of the year.
The response was swift, with bitcoin dropping around $2K to the current $109,600, now down 5% in the last 24 hours and mostly giving back its significant gains from earlier this week.
Stocks also declined in response to Powell’s statement, shifting from a slight daily gain to a modest loss. The 10-year Treasury yield has surged by 8 basis points to 4.06%, and the dollar is climbing. The likelihood of a rate cut in December has decreased to 69% from 90% earlier, according to CME FedWatch.
It remains uncertain whether Powell is simply adopting a tough stance — as Fed officials frequently do — or if he genuinely believes the central bank will shift to a wait-and-see approach.
Earlier, the central bank, as anticipated, lowered its benchmark fed funds rate by 25 basis points to 3.75%-4.0%. Nevertheless, this cut was somewhat hawkish, with Kansas City Fed chief Jeffrey Schmid dissenting and opting to keep policy unchanged.
The ongoing government shutdown and economic data blackout place the central bank in a challenging position, as policymakers remain cautious about signaling additional cuts that could instigate volatility in risk assets, according to Marcin Kazmierczak, co-founder of oracle network RedStone.
“The shutdown’s data blackout renders subsequent Fed actions unpredictable, and that’s what markets despise most,” he noted in an email. “This uncertainty is likely to lead to bitcoin and broader crypto volatility through the end of the year.”
Paul Howard, director at crypto trading firm Wincent, pointed out that BTC is still striving to maintain the $110,000-$120,000 range, but worries about potential further cuts not materializing have nudged prices lower.
“I believe this provides an opportunity for short-term accumulation, and we will see macro improvements heading into November that boost risk assets before some year-end consolidation,” he added.
