Federal Reserve Meeting: Highlights From Jerome Powell’s Speech And Impact On Bitcoin

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As a seasoned crypto investor with a decade-long journey through the volatile world of digital assets, I must say that Thursday’s events have left me both exhilarated and cautiously optimistic. The Fed’s decision to cut interest rates and Chair Powell’s reassuring statements about his tenure have propelled Bitcoin to an all-time high of $76,990, a sight I never thought I’d witness in my wildest dreams.

On Thursday, both the U.S. stock market and Bitcoin prices reached new peaks after the Federal Reserve’s meeting and their decision to lower interest rates. Additionally, Fed Chair Jerome Powell’s comforting press conference alleviated fears about his possible resignation due to Donald Trump’s presidency.

Bitcoin (BTC) experienced a significant increase, touching an all-time high of $76,990, before slightly pulling back. Despite this minor setback, it still registered a 1.2% growth over the last 24 hours. In the meantime, major US stock indices also saw gains, with the S&P 500 and Nasdaq rising by 0.8% and 1.5% respectively. The likelihood of the Federal Reserve maintaining rates unchanged at their December meeting has decreased from 33% to 28%, as indicated by the CME FedWatch Tool.

Rate Cuts on Federal Reserve Meeting, Bitcoin Hits All-Time High

At their recent meeting, the Federal Reserve reduced interest rates by a quarter of a percent, bringing them to a range of 4.5% to 4.75%. This is a smaller decrease compared to the half percentage point cut they made in September. However, Fed Chairman Jerome Powell stated that this adjustment was more about fine-tuning their monetary policy rather than a significant shift, using the term “recalibration” instead of “pivot.

Powell acknowledged robust economic growth, with a 2.8% increase in GDP during Q2 and high consumer confidence, yet he considered the relatively weak job figures in October to be temporary effects caused by strikes and hurricanes.

He kept the possibility open for further accommodations, but he didn’t confirm a December interest rate reduction as anticipated by many economists, thus putting an end to the speculation that such a move would be announced. Asked if he might consider stepping down under President Trump’s administration, Powell replied, “No,” acknowledging the legal safeguards in place.

After the Federal Reserve meeting, there’s been a significant increase in the belief that interest rates might be lowered in December, with estimates now sitting at 75%. This expectation led to a drop in US Treasury yields by 10 basis points, bringing the 10-year yield down to 4.33%. The U.S. dollar also weakened by 0.7%, and gold prices spiked by 1.8%. Remarkably, Bitcoin reached an all-time high of $76,990, marking a 1% increase.

Initially, several experts were optimistic about Bitcoin (BTC) due to the expectation of clearer crypto regulations under President Trump’s administration. Currently, BTC is up by 1.2% to $74,831 after hitting a record high of $76,990, and some predict it could reach $100,000. This optimism continues in the market as talk circulates about making Bitcoin a strategic reserve for the U.S., an idea supported by Wyoming Senator Cynthia Lummis. For now, this discussion doesn’t seem to influence other significant altcoins such as Dogecoin or XRP.

Bitcoin’s Hedge Narrative Challenged by Rate Hikes

Bitcoin has often been marketed as a protective measure against economic issues like inflation, currency depreciation, and low-interest rates. This idea seemed plausible as long as the value of bitcoin kept increasing, seemingly unaffected by traditional market fluctuations. However, in reality, its value can be influenced by the same market sentiment as common retail stocks.

High-interest rates tend to deter investors from investing in risky assets such as Bitcoin. Conversely, lower interest rates are often seen as a favorable development by the Bitcoin community.

In my analysis, starting from late 2021, I noticed that as the Federal Reserve began tightening monetary policy, Bitcoin followed suit, mirroring other speculative assets. Events like the collapse of FTX significantly impacted trader confidence. However, in 2023, instability within the banking sector rekindled interest in Bitcoin due to slowing rate hikes. Then, with Treasury yields peaking in October 2023 and subsequently falling, a clearer route towards lower rates became apparent, potentially boosting Bitcoin’s appeal once more.

By September and November of 2024, it became increasingly evident that this trend was emerging. The revitalized optimism, fueled by anticipation, caused Bitcoin prices to rise again as people believed that the Federal Reserve would continue to loosen interest rates at their next meeting.

Fed Chair Powell Speech Key Takeaways

In his address, Jerome Powell, the Federal Chair, highlighted various crucial economic aspects impacting the U.S. job market, including the lingering effects of hurricanes and labor disputes that have dampened wage growth. Although unemployment has slightly decreased over the last three months, it still remains low. However, the labor market conditions are currently more constricted than before the pandemic, exerting a downward influence on inflation from job markets.

Currently, inflation is nearly at the Federal Reserve’s desired level, and Chairman Powell has emphasized his focus on maintaining economic balance. Yet, he suggested that any future rate reductions might be more gradual if inflation persists, coupled with an increase in job losses, potentially speeding up the reduction process. Despite a rise in bond yields, they remain significantly lower than their levels from a year ago, and the Fed is seeking indications of economic stabilization.

The Federal Reserve’s latest meeting indicated that the economy has been performing better than anticipated lately, but job growth was lower than expected in the recent reports on inflation and employment. Despite this, the Fed’s policy remains tight, as Chair Powell believes it has started to slow down the labor market. As rates are approaching a neutral level, the Fed is contemplating reducing the pace of cuts, although Powell made clear he would not resign if asked to do so.

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2024-11-08 18:20