Bitcoin jumps as Powell signals Fed policy adjustment

Gino Matos

Aug. 23, 2024

Polymarket bets on 50 basis point cut reach $1.9 million as Powell signals policy shift.

Federal Reserve Chair Jerome Powell speaking at a congressional hearing.

Key Takeaways

Bitcoin rose 1.1% after Fed Chair Powell hinted at policy adjustment at Jackson Hole.
Polymarket bets on a 50 basis point rate cut increased to $1.9 million following Powell's speech.

Fed Chairman Jerome Powell’s speech at Jackson Hole today reinforced the expectations of an interest rate cut in September, as he stated that “the time has come for Fed policy to adjust.” This fueled a Bitcoin (BTC) run toward $62,000 after a 1.1% rise in the past hour.

Ethereum (ETH) and Solana (SOL) followed with 0.8% and 1.1% growth respectively. Powell’s dovish stance was further indicated by his sharing that the Fed is confident that inflation will reach 2%.

Moreover, the Fed Chairman said that they don’t seek further labor market cooling, and will do everything to support strong movement in the job market.

Notably, Powell’s remarks sustain the content of the recently published Fed minute from the Federal Open Market Committee (FOMC) meeting in July. The document implied that a 25 basis point (bps) cut in US interest rates is likely in September.

Additionally, the minute also reinforced a late July Powell speech about a monetary policy change if the date keeps coming as expected. The consecutively aligned discourse gives a sense of security to risk asset investors.

Users of the Polygon-based prediction market Polymarket are even more bullish with the latest words from the Fed Chairman, as the odds of a 50bps rate cut leaped from 18% to 22% moments after his appearance at Jackson Hole. Furthermore, the 50bps cut bet has the highest amount of funds allocated in the poll, surpassing $1.9 million.

According to Bitfinex analysts, Polymarket users are not wrong in expecting a more aggressive rate cut. In an insight shared with Crypto Briefing, they explained that the job data mentions by Powell raised the possibility of a more aggressive 50 bps cut.

“If Powell leans towards acknowledging the labor market’s weakening, markets could respond positively to the expectation of a rate cut, leading to a potential rally in risk assets like Bitcoin,” Bitfinex analysts added.

Earlier this week, Bitcoin’s price declined despite the Bank of England’s rate cut and dovish signals from the Federal Reserve which forecasted a potential rate reduction in September.

Recently, Bitcoin’s value fluctuated between $59,900 and $61,000 after dovish minutes from the Federal Open Market Committee hinted at a likely September rate cut, pushing its price momentarily to $62,000.

In July, Bitcoin’s value increased to $59,100 when US inflation rates dropped unexpectedly, fueling anticipation of a Federal Reserve rate cut in September.

Last month, Jerome Powell was expected to prepare for a 25 basis points rate cut at the Federal Reserve’s September meeting, indicating a cautious approach to future rate adjustments amidst a stable traditional market, though Bitcoin struggled.

In May, Bitcoin rallied to $59,300 following the Federal Reserve’s decision to maintain interest rates, as bolstered by Fed Chair Jerome Powell’s reference to persistent high inflation.

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