negative news from Fed Chairman Jerome Powell

Yesterday, Fed Chairman Jerome Powell held the usual press conference, following the FOMC meeting, during which he said things that negatively impacted the crypto market. 

In reality, many of the things he said should be interpreted as positive news, both for the financial markets and especially for the real economy, but there is one in particular that triggered the sales. 

Sure, the picture described is not rosy, but it’s not black either. In fact, overall the picture described has been positive, even though with lights and shadows, but certainly with more lights than shadows. 

Jerome Powell: the negative news from yesterday’s FOMC

The only truly negative news given yesterday by Powell is the one concerning the upcoming rate cuts. 

The FOMC decided to cut interest rates by 25 basis points, but the market had already fully priced in this news. In fact, when it was announced, the markets did not react at all. 

Except that, just as they were already pricing in this cut, they were also partially pricing in a similar cut for December, which is for the next scheduled FOMC meeting. 

According to Polymarket data, before Powell’s press conference, bets indicated an 85% probability of another 25 basis point cut in December. 

At a certain point, however, Powell explicitly stated that it is by no means certain that the FOMC will cut rates again in December. 

Although he didn’t even actually say that there are significant chances that the cut won’t happen, the markets interpreted his words as a reduction in the probabilities. In fact, on Polymarket the chances of another 25 basis point cut in December have dropped to 65%. 

The Consequences of Powell’s Words

This new forecast prompted many speculators who had open positions primarily on the dollar to reposition themselves, and this had consequences. 

The Dollar Index suddenly jumped from 98.8 points to 93.3, and Bitcoin dropped from $111,000 to $109,000.

All this then also had a cascading effect on the entire crypto market. 

It should be noted, however, that Powell actually stated that no decision has yet been made for December, and that this will only be made in light of new data that will emerge in the meantime. He also added that such data might be scarce due to the government shutdown, but he absolutely did not say that the probabilities of a further cut have decreased. 

In fact, during the following hours, the probabilities on Polymarket climbed back above 70%, returning to the levels of October 10. 

Bitcoin and Ethereum

The Dollar Index subsequently fell to 99 points, although today during the day it returned to 99.2.

The reaction of the price of Bitcoin, after another phase of forced liquidations of leveraged positions, was to position itself more or less around $110,000, which is the same price level that constituted an important support precisely from the 10th to the 16th of October. 

It is therefore not a particularly significant reaction, except for the fact that it interrupted the short upward trend that began last Thursday. 

In other words, since the first of October, there have now been two failed attempts to restart the bullrun. 

As for Ethereum, it is continuing the downward trend that started on Monday, but for now, it has only returned to last Thursday’s levels. 

The other crypto

Taking as a reference the Total3, which is the total market capitalization of all altcoins excluding Ethereum and stablecoin, as well as Bitcoin, its movement does not seem particularly significant. 

The current level is indeed in line with that of Sunday, but also with that of October 11. 

In other words, unlike Bitcoin which tried to restart the bullrun last week, the Total3 has been practically moving sideways for almost three weeks. 

Moreover, its current level is even in line with that of the second half of July, so much so that it can be said that, with the exception of the second half of September and the first ten days of October, it has practically been consolidating since then within a volatile range. 

However, it should be specified that the levels reached on October 7 are the new all-time highs, recorded in the absence of an altseason, even if only slightly higher than the highs of 2021. 

So on one hand, the current situation of the altcoin market as a whole does not seem problematic at all, although in reality, when analyzing individual coins, several problematic situations can be observed. 

The real major issue is that from 2021 to today there has been an enormous proliferation of new crypto and new tokens, which has led the market capitalization to spread over a much higher number of coins.

And so even in the presence of decidedly good data for the Total3, many individual crypto are still struggling and far from the highs of that time.