Bitcoin
and other cryptocurrencies fell Friday as traders braced for Federal Reserve Chairman Jerome Powell’s hotly anticipated speech at the Jackson Hole Economic Symposium, which looms large as a catalyst for risk-sensitive assets.
The price of Bitcoin has fallen 1.5% over the past 24 hours to below $26,100. The largest digital asset has been hovering around $26,000 since a selloff last week snapped a period of historically low volatility and brought Bitcoin down to a trough below $25,500, marking the lowest levels since mid-June.
“After plummeting from $29,000, Bitcoin’s consolidation at around $26,000 continues as the market quietly awaits the Fed Chair Powell’s speech at the Jackson Hole Economic Symposium,” said Yuya Hasegawa, an analyst at crypto exchange Bitbank.
Cryptos—like stock indexes such as the
Dow Jones Industrial Average
and
S&P 500
—are likely to move on the back of Powell’s words at Jackson Hole as the outlook for interest rates remains a key catalyst for risk-sensitive assets.
The Fed has ramped up rates to a generational high since last March in a bid to control inflation, a major force behind the selloff in stocks and cryptos in 2022. Elevated rates weigh heavily on the likes of Bitcoin because when investors can earn higher rates on cash or risk-free Treasuries, there are fewer incentives to pile into riskier bets.
Traders have recently been shifting their expectations for the outlook for rates in moves that have shaken digital asset prices. On the one hand, a long-reiterated commitment to fighting inflation and signs of a strong economy will encourage the Fed to keep interest rates higher for longer than once thought. On the other, there have recently been growing fears of a “hard landing”—that the Fed cannot bring inflation under control without causing an economic slowdown—amid a spate of downbeat economic data, which has moderated rate expectations.
Powell’s speech at Jackson Hole will be scrutinized closely by investors attempting to read into the path ahead for the Fed.
“For the price of Bitcoin, no additional hawkish surprise could lead to a mild rebound as the current tension and sense of caution could rewind,” said Hasegawa. “However, no matter how the price reacts to Powell’s speech, it will likely struggle to show a clear direction towards the next [Fed policy] meeting in September.”
Beyond Bitcoin,
Ether
—the second-largest crypto—was down 1% to $1,650. Smaller cryptos, or altcoins, were also in the red, with
Cardano
falling 2% and
Polygon
dropping 3%. Memecoins exhibited more of the same, with
Dogecoin
down 2% and
Shiba Inu
declining 3%.
Write to Jack Denton at [email protected]
Read the full article here
