Tomorrow, Friday, Jerome Powell will give a speech at the annual meeting of central bankers in Jackson Hole, which could be of utmost importance for bitcoin and the entire financial market. There is much speculation about the possible implications for monetary policy and the financial landscape in general.
It is noteworthy that the Jackson Hole symposium comes on the heels of the historic revision of the US employment rate released yesterday by the US Bureau of Labor Statistics. New job additions in the US were revised downward by 818,000, the largest revision since 2009. This significant revision underscores a weaker labor market, a crucial factor for monetary policy considerations, just as inflation rates began to show signs of slowing, with the core consumer price index (CPI) falling from 3.9% in December 2023 to 3.2% in July.
Will bitcoin rise again on Friday?
Notably, the symposium also comes shortly after the release of the Federal Open Market Committee (FOMC) minutes, which revealed that the committee is divided and grappling with the decision to cut rates in 2024, amid evolving economic data. The weakening labor market, coupled with subdued inflation, has heightened expectations that Powell will signal a rate cut, possibly as early as September.
Quinn Thompson of Lekker Capital x.com/qthomp/status/1826430960831004848″ target=”_blank” rel=”noopener nofollow”>provided a detailed assessment of the situation via x and linked current economic indicators to a potential dovish turn by the Fed. Thompson argued: “The facts have changed dramatically over the year, but all I see is continued ambitions to fade a dovish Powell. The first half was the time for that, but now the data is giving the Fed the green light.” He noted that with inflation cooling and unemployment rising from 3.7% in December to 4.3% today, conditions are ripe for the Fed to ease rates.
Thompson also addressed market fears about the possibility of a hawkish surprise from Powell, commenting: “A lot of ‘warning calls’ about Powell disappointing markets on Friday, but I don’t get it. The Fed isn’t going to do 50 basis points in September and the market doesn’t think so either, so who cares. He already largely confirmed 25 basis points at the previous FOMC meeting.” He stressed that the combination of weaker inflation data and ongoing labor market concerns have solidified the case for cuts, making a hawkish turn highly unlikely.
On the other hand, Mark Minervini, author of “Trade Like A stock market Wizard” and “Think & Trade Like a Champion”, x.com/markminervini/status/1825918737649680701″ target=”_blank” rel=”noopener nofollow”>noted“Wall Street is betting that on Friday at Jackson Hole, Powell will confirm that interest rate cuts will be forthcoming. The question is not whether or not they will be cut, but how big they will be. Many expect Powell to signal that a restrictive monetary policy is no longer justified.” Minervini noted that any deviation from this anticipated narrative could disappoint investors, suggesting that the market is ready for dovish news.
The bitcoin market is highly sensitive to changes in US monetary policy. Interest rate cuts typically reduce the attractiveness of yield-bearing assets such as bonds, making riskier investments such as stocks and bitcoin more appealing. Therefore, a dovish stance by Powell could lead to increased capital inflows into the markets, potentially triggering a return of the uptrend for bitcoin.
Conversely, if Powell's tone leans toward maintaining or tightening monetary policy, this could generate risk-averse sentiment among investors, possibly putting downward pressure on bitcoin prices as capital shifts to safer, yield-generating assets.
The market will therefore be watching not only Powell's policy indications, but also his tone and the specific language he uses in his speech. Historical precedents for Powell's previous Jackson Hole speeches suggest that market moves can be swift and significant, depending on the nature of his announcements.
At the time of writing, btc was trading at $61,241.
Featured image from Shutterstock, chart from TradingView.com
