Cryptocurrency Market Declines Following Powell’s Hawkish Comments
Major cryptocurrencies experienced a decline on Wednesday evening following Federal Reserve Chair Jerome Powell’s hawkish comments, which cooled expectations for an imminent rate cut.
The Federal Reserve maintained its benchmark fed funds rate range at 5.25%-5.5% after the initial Federal Open Market Committee gathering of the year. Market observers eagerly awaited indications of a potential rate cut, with many anticipating it to occur at the upcoming meeting in March.
“Based on the meeting today,” said Powell at his post-meeting press conference, “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to [cut].”
Following the statement, risk assets, including cryptocurrencies, experienced a sudden decline. Bitcoin plummeted to $42,100, while Ethereum and Dogecoin also saw significant losses.
The global cryptocurrency market cap now stands at $1.51 trillion, showing an 8.29% decrease in the past 24 hours.
In addition to the decline in the cryptocurrency market, stocks also dipped on Wednesday following Powell’s indication that the central bank is unlikely to cut rates in March. The Dow Jones Industrial Average concluded the day down by 317.01 points, or 0.82%, at 38,150.30. The S&P 500 declined by 1.61% to 4,845.65, and the Nasdaq Composite experienced a 2.23% drop, ending the session at 15,164.01.
The Treasury yields fluctuated, with the benchmark 10-year yield recently hovering around 3.9%. Meanwhile, Alphabet experienced a decline of over 7%, marking its poorest performance since Oct. 25. This was attributed to underwhelming ad revenue, which overshadowed the better-than-expected earnings and sales. Similarly, shares of tech companies Microsoft and AMD decreased by nearly 3% each due to lower-than-anticipated forward guidance following their quarterly results.
Cryptocurrency analyst Michael Van de Poppe foresees Ethereum poised to reach $3,500-4,000 within the next 3-6 months. However, Zach Pandl, the head of research at Grayscale Investments, suggested that Powell’s comments may strengthen the dollar over the short-term, which could be a temporary headwind for bitcoin.
As the market looks ahead, on-chain analyst Ali Martinez provided four key points to consider as we approach the Bitcoin Halving in April 2024. These points include post-halving corrections, significant post-halving rallies, bull market durations, and the potential timing of the next Bitcoin market top.
Overall, the recent decline in cryptocurrencies can be attributed to Powell’s comments, which damped expectations for an imminent rate cut. However, analysts remain optimistic about the long-term prospects of cryptocurrencies such as Ethereum, despite short-term fluctuations. Investors will be closely watching for any further developments in the cryptocurrency market and the Federal Reserve’s monetary policy decisions.
