Fed Chair Jerome Powell just delivered his first speech since holding rates steady last week. What did he say and what impact did it have on the crypto markets?
On thursday, May 15, FED Chair Jerome Powell delivered his remarks at the Thomas Laubach Research Conference on Framework Review.
The biggest takeaway is that the speech leans slightly bullish, which is good for Bitcoin and the larger crypto market. Let us look at the key highlights of this speech and how this will impact Bitcoin and the larger crypto market.
What Did He Say?
Of all the things that Powell said, three piqued our interest as they have a moderate to severe impact on the crypto market performance. The first was the emphasis on clearer communication by the FED, especially during periods of economic uncertainty and shocks.
This is important because prompt communication can help cushion crypto prices from unnecessary volatility.
The second was the observation that the PCE inflation rate for April was 2.2%. But while this is a positive step from its 2022 highs, it has been accompanied by higher unemployment.
This makes it impossible to predict what the central bank will pay closer attention to when deciding whether to lower rates in June.
Lastly, Powell expressed his concern about higher real interest rates. He argued that long-term interest rates are higher now, which we believe is due to the pessimism about the US and China arriving at a trade deal.
This is bad for crypto because higher interest rates make high-risk investment assets like cryptos unappealing to investors.
How Will This Impact Bitcoin and the Crypto Markets
Bitcoin remained largely unbothered by the FED chair’s remarks. Its price remained largely unchanged, hours after Powell delivered his speech.
However, it is worth noting that it has lost the momentum that pushed it above $105,000 over the weekend. It is currently down by 1.1% in the last 24 hours and currently trades around $101,700. BTC’s daily trading volumes are also down by 15% to $43 Billion.
The larger crypto market has also cooled down and has even shed 1.35% of its market in the last 24 hours to settle around $3.27 Trillion. But despite the cooled trading volumes, investor sentiment toward the market is still high, as evidenced by the fear and greed index reading of 71.
Bottom Line
Overall, the Fed Chair’s speech presented the market with a mixed outlook for Bitcoin and the larger crypto market. Note that though the market’s immediate reaction was a show of stability, the speech raised serious concerns.
These will most likely have a negative impact on the short term price action of Bitcoin and the crypto industry at large.
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