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Highlights
- Fed Chair Powell's speech signals a potential interest rate cut in September.
- The crypto market rallied, with Bitcoin price nearing $63,000 after Powell's remarks.
- An expected rate cut could boost the crypto market, increasing liquidity and investor confidence.
- Bitcoin critic Peter Schiff warns of potential risks, predicting a surge in inflation ahead due to the weak dollar.
The latest speech of Fed Chair Jerome Powell has fueled optimism in the broader financial market, triggering a rally in stocks and crypto rally. The Fed Chair has signaled a potential interest rate cut in September that could impact the global financial sector, including the crypto market. With Powell’s latest hint, all three US stock indices including DJIA, S&P 500, and Nasdaq, as well as the crypto prices rallied.
Fed Chair Jerome Powell’s Speech Highlights
Fed Chair Jerome Powell has adopted a dovish tone during his recent speech, fueling a rally in BTC and Ethereum. This marks a stark contrast from his previous stance, indicating that the time has come for the US central bank to adjust its policy rates.
He highlighted the unmistakable cooling in labor market conditions and noted that the labor market is unlikely to contribute to inflationary pressures in the near future. Besides, Powell emphasized that the direction for policy is clear, with the timing and pace of rate cuts to be determined by incoming data and evolving economic conditions.
Powell’s Remarks Boost Market Optimism
Meanwhile, this shift in Jerome Powell’s stance has sparked a rally across financial markets, including cryptocurrencies. Bitcoin, the largest crypto by market capitalization, experienced significant gains following Powell’s remarks, nearing the brief $63K mark.
The anticipation of lower interest rates is driving investor confidence. For context, reduced borrowing costs usually lead to increased liquidity in the market, benefiting risk assets like cryptocurrencies. Kaiko, a prominent research firm, commented on the Fed Chair’s speech, noting that the market is now pricing in a high probability of a 25 bps rate cut in the upcoming Federal Reserve meeting.
However, the possibility of a more substantial 50 basis point cut has also gained traction, with market sentiment leaning towards a dovish monetary policy stance. According to the CME FedWatch Tool, there is a 59.5% chance of a 25bps rate cut in September.
Potential Impact On Crypto Market
The expected rate cut in September could have a broader impact on the crypto market. So far, high interest rates have made short-term Treasury Bills attractive to investors, leading to a surge in tokenized money market funds. For context, BlackRock’s USD Institutional Digital Liquidity Fund has noted more than $500 million in inflows since its March launch.
Besides, Philadelphia Fed President Patrick Harker echoed Jerome Powell’s sentiment recently in a Bloomberg interview. he stated that the central bank should start trimming the interest rates now. Besides, he advocated for a “methodical” approach, ensuring a steady path downward without abrupt changes.
BTC Critic Peter Schiff Warns Over Potential Risks
However, it appears not everyone shares this optimistic outlook after the Fed Chair’s speech. Bitcoin critic Peter Schiff warned that cutting rates could weaken the U.S. dollar and reignite inflation. Schiff argued that the recent decline in the U.S. Dollar Index could further trigger inflationary pressures. If this holds true, it could pose risks to the broader economy and potentially dampen the overall market’s gains.
As of writing, US Dollar Index Futures were down 0.82% to $100.567, while the US 10-year Bond Yield fell 1.01% to 3.814. On the other hand, BTC price has surged over 4% to $62,861.90, boosting optimism over a further rally following Jerome Powell’s speech. Notably, a recent Bitcoin price analysis showed that if the crypto could breach certain resistance, it could target the $70,000 mark next.
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