Jerome Powell said ‘risks shifted’ this week: How crypto analysts reacted

Key Takeaways

What did Powell say that impacted the crypto market?

Fed chair Jerome Powell adopted a cautious ‘wait and see’ approach that briefly spooked markets. 

How did analysts react to Powell’s stance? 

Experts remained bullish in the mid-term, despite uncertainty in the near term. 

Bitcoin [BTC] slipped to $111K after Fed’s chair Jerome Powell speech, but jumped above $112K as of the time of writing. The rest of the market posted mixed results. 

Source: CoinMarketCap

In his statement on the economic outlook on the 23rd of September, Powell said that employment and inflation risk have risen, prompting them to cut the interest rate last week. 

“In recent months, it has become clear that the balance of risks has shifted, prompting us to move our policy stance closer to neutral at our meeting last week.”

But he stressed ‘uncertainty’ around inflation, the challenging balancing act, and adopted a cautious tone, as he added, 

“But uncertainty around the path of inflation remains high. We will carefully assess and manage the risk of higher and more persistent inflation.”

Analysts react to Powell’s speech

For Matt Mena, a crypto strategist at 21Shares, Powell’s ‘wait and see’ approach could induce volatility around key macro data releases. In an email statement to AMBCrypto, Mena said, 

“With valuations stretched and leverage elevated, markets may continue to trade in bursts of volatility around incoming data.” 

As such, the unemployment claims report on the 25th of September and the core PCE (price consumer index) index data on Friday could induce price swings. 

In fact, Shawn Young, chief analyst at MEXC exchange, added that the market was already pricing caution around the above macro data releases. 

Young noted that this could add liquidation pressure. But he added that such a move would be crucial for a healthy rebound, especially after the recent $1.7B wreckage. He told AMBCrypto that, 

“While the liquidations may have introduced short-term pain, they are often a sign of a healthy rebalancing, especially considering the scale of the current one.”

Mena also shared a similar positive outlook in the mid-term and added, 

“With froth driven by the Fed’s September rate cut and expectations of two more cuts this year (91% odds of another in October), this reset looks more like a healthy recalibration than a shift in trend.”

Source: CME FedWatch tool

Interestingly, Fundstrat CIO Tom Lee was also bullish, highlighting that Powell’s stance on equity market valuation was not an ‘ominous sign.’

At the time of writing, though, BTC reclaimed $112K and could retarget $117K and push it to a price discovery again. 

But Young warned that a sustained dip below $112K could drag it to $108K. Overall, short-term caution could prevail, but analysts remained bullish in the mid-term.