Jerome Powell. Source: video screenshot, Yahoo Finance / YouTube
The crypto market on Tuesday saw cautious optimism ahead of an annual key meeting of global central bankers known as the Jackson Hole Symposium, with prices of both bitcoin (BTC) and ethereum (ETH) climbing higher for the past 24 hours.
The Jackson Hole Symposium is scheduled to begin in Wyoming in the US this Thursday, with US Federal Reserve (Fed) chairman Jerome Powell expected to hold a closely watched speech about the economic outlook on Friday.
It is presumed that Powell will use his speech to further guide expectations on the Fed’s interest rate policy, with some predicting that Powell will once again take a more hawkish stance on monetary policy.
Among those who have warned about a hawkish Powell is David Duong, head of institutional research at Coinbase, who wrote in a recent market commentary that the Fed chair is likely to signal a need for continued interest rate hikes in the US.
“Jerome Powell will more likely try to take a more measured approach in Wyoming and emphasize that the tightening cycle isn’t over yet,” Duong said, noting that the minutes from the last Fed meeting may have been interpreted as more dovish than the Fed had intended.
Duong added that bitcoin, as a result, could struggle in the short term, with the current technical analysis picture adding increased bearishness for the largest crypto.
“BTC will likely retest support at [USD] 20,830 and [USD] 19,230 over the coming few weeks,” Duong wrote, while noting that Powell’s comments at the Jackson Hole symposium will be “closely watched” by traders.
A similar sentiment was also shared by analysts at the Singapore-based crypto trading firm QCP Capital, who said in a recent market update that “Fed officials have been actively pushing back on the dovish narrative in the market.”
“This has led to equities stalling and trading lower, yields drifting higher and USD rallying across the board,” the firm wrote.
The latest update followed a commentary from earlier in August when the same firm said it expected the market to “remain supported” regardless of the Fed pushing back on “the dovish narrative.”
Other market participants, such as Mott Capital Management founder Michael Kramer, also opined that Powell is likely to signal that rate increases will continue, albeit at a slower pace.
Kramer wrote in a market update from Monday that,
“I would expect that Powell lays out quite clearly that the pace of future rate hikes may slow but that they have much further to climb and are likely to remain high for some time.”
He added that Powell “needs to clearly articulate that rate cuts will not be in the future until it is clear that inflation is on a downward trajectory.”
Meanwhile, the stock market in the US has begun to see inflows again after many investors left earlier in the summer, the Wall Street Journal reported today.
The report cited data from financial research firm Refinitiv Lipper that said investors have funneled a net USD 11.7bn into mutual funds and exchange-traded funds (ETFs) over the past two weeks. It added that corporate earnings have also held up better than expected, and noted that inflation in the US has recently eased from its highs, potentially lowering the risk for aggressive rate hikes.
Bitcoin and other major cryptoassets are known to correlate relatively closely with stocks and other risk assets. As a result, cryptoassets generally react negatively to larger-than-expected interest rate increases.
As of Tuesday at 11:20 UTC, BTC stood at USD 21,402, up 0.6% for the past 24 hours, and down 11.5% for the past 7 days. At the same time, ETH traded at USD 1,604, up 2% for the day and down 16% for the week.