- Bitcoin rises 2% to $114,200 after comments.
- Ether bounces back 8% after a 12% drop.
- US stocks increase 1%, yields fall to 4.27%, gold up 0.6%.
Federal Reserve Chair Jerome Powell changed the market narrative on Friday by indicating that a September rate cut is actively being considered, swiftly altering expectations in global financial markets.
In his address at the Kansas City Fed’s Economic Symposium in Jackson Hole, Powell pointed out that downside risks to employment are increasing and could manifest as layoffs and rising unemployment.
This tonal shift triggered immediate reactions in both traditional and digital markets, with Bitcoin, stocks, bonds, and gold all responding swiftly to his statements.
Bitcoin jumps 2% after a recent 10% decline
Bitcoin (BTC) rose approximately 2% to $114,200 following Powell’s remarks, recovering part of a significant drop earlier in the week.
The cryptocurrency had reached a peak above $124,000 about a week ago when market confidence in a September rate cut was at nearly 100%.
However, as expectations fell to 69% in the hours leading up to Powell’s speech, Bitcoin plummeted nearly 10% to $112,000.
Data from CME FedWatch indicated that immediately after Powell’s comments, the likelihood of a September rate cut surged back to around 90%.
This increase in confidence bolstered digital assets, which had been under pressure from dwindling expectations of imminent monetary easing.
Ether recovers 8% after a 12% drop
Ethereum (ETH) displayed greater volatility than Bitcoin during this period.
The coin saw a 12% correction after nearly reaching its all-time high, indicating a deeper retreat in speculative assets.
Nevertheless, ETH rebounded nearly 8% following Powell’s statements, underscoring the sensitivity of cryptocurrencies to Federal Reserve indications.
The recovery suggests that traders are still adjusting their positions based on policy expectations, with Ether’s more pronounced fluctuations reflecting a higher risk appetite.
Stocks, bonds, and commodities follow suit
Traditional markets mirrored the movements in digital assets.
The Nasdaq Composite dropped 3% in the days preceding Powell’s address as investors anticipated fewer chances of a rate cut.
However, in the wake of the changed tone, US stocks rose by over 1%.
Treasuries also gained, with the 10-year yield decreasing by six basis points to 4.27%.
The US dollar index fell by about 0.5%, while gold prices increased by 0.6%, reflecting a broader shift toward assets that typically benefit from more accommodative monetary policy.
Risk markets exhibit heightened sensitivity to Fed signals
In the days preceding Jackson Hole, traders had adopted a cautious position, expecting Powell to maintain an aggressive stance.
This led to selling pressure across risk markets, particularly in the crypto sector.
The change in tone not only revived expectations for a September cut but also highlighted the fragility of investor sentiment.
These developments emphasize how closely tied risk assets are to the Federal Reserve’s policy outlook.
Bitcoin’s drop and subsequent recovery, alongside Ether’s deeper correction and rebound, illustrate that digital markets are closely following Fed communications, while traditional stocks, bonds, and commodities reflect similar trends.
