Jerome Powell took the markets by surprise. For days, investors were expecting a firm speech from the Federal Reserve chairman. But at Jackson Hole, the tone shifted: Powell clearly raised the possibility of a rate cut as soon as September. “The downside risks to employment are increasing“, he stated, highlighting that this situation could quickly lead to more layoffs and a rise in unemployment.
The relief was immediate. Bitcoin, under pressure all week, surged over 2% to around $115,000. US stocks followed suit, with a gain of over 1%, while the 10-year Treasury yield fell to 4.27%. A similar trend for gold (+0.6%) and a weakened dollar (-0.5%). In essence: investors switch back to “risk-on” mode as soon as the Fed shows flexibility.
The dark week before Powell
The contrast is striking. Just a few days earlier, Bitcoin had soared above $124,000, driven by the near certainty of a rate cut in September. But optimism quickly faded: the likelihood of easing fell to 69% on the eve of the speech, causing a nearly 10% drop in BTC to $112,000. Minutes after Powell’s comments, these expectations shot back up to 90%, reigniting the bullish momentum.
Ethereum and risky assets under pressure: a fresh start?
Ethereum experienced an even more painful correction. Just a few dollars from its all-time high, ETH plummeted by 12% in a week, confirming market jitters in the face of the Fed. Powell’s surprise tone during the speech propelled ETH by nearly 8% in 15 minutes, surpassing $4,600.
The Nasdaq, a gauge of tech stocks that had also dropped nearly 3% the previous week, bounced back with almost 2% gains. Another sign that US monetary policy remains the guiding light for both crypto and traditional markets.
And now?
If the Fed confirms a rate cut in September, the dynamic could turn into a powerful catalyst for Bitcoin and crypto assets. In a global liquidity tightening context, a monetary shift from the Fed breathes new life into investors. But beware: Powell emphasized that it all depends on the upcoming employment and inflation figures. Volatility is, therefore, the watchword, and markets will have to continue dealing with this uncertainty.
In summary, the Fed has not yet cut rates, but Powell has reignited the spark. And for Bitcoin and Wall Street alike, this simple signal is enough to reset the balance.
