The day is turning into a solid decline in crypto after the Federal Reserve Chairman’s unexpectedly dovish comments at his post-policy meeting press conference.
“A rate cut in December is far from a foregone conclusion,” Powell said in his opening remarks. It was a blow to markets, which had pegged a 90% chance of another rate cut at the Fed’s final meeting of the year.
In the case of Bitcoin the impact on prices was immediate Dropping nearly $2K to current $109,600, now down 5% over the past 24 hours and largely giving up its big gains from the beginning of the week.
Powell’s comments also sent the stock into a tailspin, turning from a modest gain on the day to a modest loss. The 10-year Treasury yield has now risen 8% basis points to 4.06% and the dollar is moving higher. According to CME Fedwatch, the probability of a rate cut in December has dropped to just 69% from 90% previously.
Whether Powell is simply taking a dovish stance – as Fed officials often do – or whether he truly believes the central bank will return to a wait-and-see stance remains to be seen.
As expected, the central bank cut its benchmark fed funds rate by 25 basis points to 3.75%-4.0% a few minutes earlier. However, the cut was kind of drastic, if that’s even possible, so Kansas City Fed chief Jeffrey Schmidt broke with his colleagues and voted to keep policy on hold.
The ongoing government shutdown and economic data blackout have put the central bank in a difficult position, with policymakers cautious about signaling further cuts, which could create volatility in risk assets, said Marcin Kazmierczak, co-founder of Oracle Network Redstone.
“The data blackout of the shutdown means the Fed’s subsequent moves are now unpredictable, and that’s the thing markets hate most,” he said in an email note. “This uncertainty could mean Bitcoin and broader crypto instability by the end of the year.”
Paul Howard, director of crypto trading firm Vincent, said BTC is still trying to hold the $110,000-$120,000 range, but concerns about potentially missing a further cut have pushed prices slightly lower.
“I believe this is convenient for short-term accumulation and we will see a broad correction in November, leading to a rise in risk assets before the end of the year,” he said.