A solid down day in crypto is morphing into a plunge after the Federal Reserve Chairman’s unexpectedly hawkish remarks at his post-policy meeting conference.
“A rate cut in December is far from a foregone conclusion,” Powell said in his opening remarks. That was a shock to markets, which priced in a 90% chance of another rate cut at the Fed’s final meeting of the year.
The impact on prices was immediate, including Bitcoin Grabbing nearly $2k to the current $109,600, it’s now down 5% over the past 24 hours and largely given up on the big gains from earlier in the week.
Stocks were also lower on Powell’s statement, moving from a modest advance for the day to a modest loss. The 10-year Treasury yield now jumped 8% basis points to 4.06% and the dollar was higher. The odds of a December rate cut fell to just 69% from 90% earlier, per cme fedwatch.
Whether Powell is just walking a hard line — as Fed officials often do — or whether he really believes the Central Bank will return to wait-and-see mode, remains to be seen.
The central bank minutes before, as expected, is trimmed The benchmark fund rate it feeds by 25 basis points to 3.75%-4.0%. However, the cut was kind of hawkish, if possible, with Kansas City Fed Chief Jeffrey Schmid undermining his colleagues and voting to stabilize policy.
The ongoing government shutdown and economic data blackout put the central bank in a tough spot, with policymakers remaining cautious about signing further cuts that could spark volatility in risk assets, said Marcin Kazmierczak, co-founder of Oracle Network Redstone.
“The shutdown data means the Fed’s next moves are unpredictable right now, and that’s what markets hate the most,” he said in an emailed note. “This uncertainty will likely mean Bitcoin and broader crypto volatility through the end of the year.”
Paul Howard, director at the crypto trading firm, noted that BTC is still trying to hold the $110,000-$120,000 range, but concerns of an additional 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 driving risk assets before some end of the year,” he added.
