Bitcoin Traders Anticipate Jerome Powell’s Speech: Selling Precedes Possible Hawkish Commentaries

Bitcoin Prices and Jerome Powell’s Speech: A Market in Anticipation

The bitcoin market has recently been characterized by traders speculating on the future course of interest rates, as they prepare for the Federal Reserve Chairman, Jerome Powell’s keynote address at the Jackson Hole Economic Policy Symposium. Bitcoin’s value has slightly decreased in the lead-up to this anticipated event. This drop is in anticipation of an interest rate cut, despite the increasing bearishness in the bitcoin options pricing across different time periods. Nonetheless, the larger ‘secular bull’ trend for bitcoin is expected to continue, according to some market analysts.

Trading Projections ahead of Powell’s Speech

Leading up to Jerome Powell’s address, bitcoin traders have entered a phase of profit-taking, speculating on the possibility of a negative surprise. The world’s largest cryptocurrency, bitcoin, has seen a 10% decline from its record high of $124,290, as recorded on August 14. Despite the widespread expectation of an imminent rate cut in September, digital currency investors are speculating that Powell’s tone may be hawkish, and he may not give any signal pointing towards a likely rate cut.

Coinbase-Binance Spread

An interesting trend showing strong US spot selling is the move of the Coinbase-Binance spread into the discount territory. This spread represents the price discrepancy in the spot bitcoin (BTCUSD) between the largest publicly traded exchange in the U.S. and the largest global exchange. Sean Farrell, Fundstrat’s head of digital asset strategy, refers to this spread as suggestive of ‘risk aversion,’ further evidenced in the bitcoin options pricing across various time spans.

Influence of Interest Rate on Bitcoin Price

Decisions taken at Federal Reserve meetings can influence bitcoin prices. Jerome Powell’s address could potentially impact the momentum propelling bitcoin prices higher at the moment. Reductions in interest rates typically push investors to take on higher risks, leading to increased interest in stocks and risky assets like cryptocurrencies.

Bitcoin’s Potential Reaction to the Speech

However, the recent downturn in bitcoin pricing might set the scene for a surge before the much-awaited event. This is reflective of the traditional market mantra: “buy the news, sell the rumor.” The trading landscape leading to such pivotal events can align with this speculative cycle.

Monetary Policy Indicators and September Rate Cut

Insights into U.S. monetary policy suggest that a rate cut in September is not a certain outcome. Futures traders are now anticipating a 73% chance of the Fed lowering its target rate by a quarter of a percentage point, a decrease from last week’s prediction of 92%.

Analysts’ Outlook on Bitcoin

Despite the uncertainty in the market, Ned Davis Research analysts Philippe Mouls and Pat Tschosik are still optimistic about bitcoin’s outlook. They believe that the ‘secular bull’ for bitcoin is yet to conclude, considering bitcoin usually experiences a major upsurge or ‘blow off top’ before any significant decline. These analysts are also observing other trends in the market, like the shift to other crypto trading volumes on Coinbase, which now account for 55%, the highest since Q4 of 2021, and the fact that the largest cryptocurrency has yet to experience a 50% drawdown for 661 days, which is just two months shy of breaking its record of 738 days.

Impact on the Stock Market

Should bitcoin prices rebound in the short term, a corresponding rise in stock prices may follow shortly. This is according to Tom Lee from Fundstrat, who indicated that cryptocurrencies like bitcoin (BTC) and ethereum (ETH) are lead indicators for equities.