Cryptocurrency prices rose on Wednesday following the more dovish than expected feedback from Federal Reserve Chairman Jerome Powell in his press conference. The central bank has made considerable progress in combatting disinflation, Powell remarked, causing assets like stocks, bonds, and digital currencies to surge. The cost of bitcoin closed near $23,700 – up nearly 2.7% and closer to 4.0% from its pre-Fed levels as low as $22,700.
Ethereum was also on the rise, closing at $1,640 – a 3.5% increase. The second-biggest cryptocurrency by market capitalization is moving closer to a bullish breakout from a short-term pennant structure that could open the way to a rapid run towards $1,800 resistance. Meanwhile, other major altcoins such as Cardano, Solana, Polygon, and Polkadot have all risen by 4-8% since the Fed announcement.
Powell Fails to Deter Market
Powell had an opportunity to contain the current easing of economic conditions (i.e. the January Fed meeting) via a transfer up in stocks, cryptocurrencies, or down in the US dollar. However, he argued that it was important to focus on long-term economic trends and not on market movements. Strategists had warned before the day’s events that Powell could attempt to heighten the harsh commentary to discourage “animal spirits” and require an immediate easing of policy. This would have been difficult, given that it is hard to bring inflation back to the two percent target.
The tough statements meant to shock the market did not exist, thus allowing the rebound in assets like cryptocurrencies. His statement is still true, though; the Fed does want to see continued price increases. Undoubtedly, more hikes are merited, which could go against the bearish market scenario that assumes only one rate hike above 25bp before the end of the rate-hike cycle in March.
