- Bitcoin rises by 2% to $114,200 after the speech.
- Ether rebounds by 8% following a 12% correction.
- U.S. stocks gain 1%, yields drop to 4.27%, and gold rises by 0.6%.
Federal Reserve Chairman Jerome Powell shifted market sentiment on Friday by indicating that a rate cut in September is under consideration, a statement that quickly altered expectations across global financial markets.
Speaking at the Kansas City Fed’s Economic Symposium in Jackson Hole, Powell emphasized increasing downside risks to employment, which could manifest in layoffs and rising unemployment rates.
This tone shift sent ripples through both traditional and digital markets, with Bitcoin, stocks, bonds, and gold all reacting within minutes of his remarks.
Bitcoin Rebounds 2% After Recent 10% Drop
Bitcoin (BTC) climbed approximately 2% to $114,200 following Powell’s comments, recovering part of its significant decline earlier this week.
The cryptocurrency had reached a record high above $124,000 about a week ago when market confidence in a September rate cut was near 100%.
However, as expectations cooled to 69% leading up to Powell’s speech, Bitcoin fell nearly 10% to $112,000.
Data from CME FedWatch indicated that immediately after Powell’s speech, the probability of a rate cut in September surged back to nearly 90%.
This renewed confidence supported digital assets, which had been pressured by waning hopes for imminent monetary easing.
Ether Rebounds 8% After 12% Correction
Ethereum (ETH) experienced higher volatility compared to Bitcoin during the same timeframe.
The asset corrected by about 12% after nearing its historic high, reflecting a deeper pullback in speculative tokens.
However, following Powell’s remarks, ETH rebounded by nearly 8%, underscoring the sensitivity of cryptocurrencies to Federal Reserve signals.
The recovery suggests traders are still positioning themselves around policy expectations, with the more pronounced fluctuations in Ether reflecting higher risk sentiment.
Stocks, Bonds, and Commodities Follow Suit
Traditional markets mirrored the movement of digital assets.
The Nasdaq Composite had dropped by 3% in the days preceding Powell’s speech as investors priced in a lower likelihood of a rate cut.
However, following the tone shift, U.S. stocks rose by more than 1%.
Treasuries also rallied, with the 10-year yield dropping six basis points to 4.27%.
The U.S. dollar index fell approximately 0.5%, while gold prices increased by 0.6%, reflecting a broader movement towards assets that typically benefit from a more accommodative monetary policy.
Risk Markets Show Increased Sensitivity to Fed Signals
In the days leading up to Jackson Hole, traders had positioned themselves cautiously, anticipating that Powell would maintain a hawkish stance.
This contributed to selling pressure in risk markets, especially within cryptocurrencies.
The tone shift not only reignited expectations for a September cut but also highlighted the fragility of investor sentiment.
These developments underscore how risk assets remain closely tied to the Federal Reserve’s policy outlook.
The correction and rebound of Bitcoin, alongside the deeper pullback and recovery in Ether, illustrate that digital markets are evolving in sync with the Fed’s communications, while stocks, bonds, and commodities reflect a similar dynamic.
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