The euphoria in the crypto markets following Donald Trump’s reelection victory hit a speed bump on Thursday, as hawkish comments from Federal Reserve Chair Jerome Powell dampened hopes for an aggressive interest rate cut in December.
In prepared remarks at a conference in Dallas, Powell stated that the economy is not signaling a need to rush to lower rates. “The strength we are seeing in the economy right now gives us the ability to be patient in our decisions,” he said.
The price of Bitcoin (BTC) dropped around 1.5% to $88,300 within minutes of Powell’s comments. As of press time, the leading cryptocurrency had slid further to $88,000, down 3.2% over the past 24 hours. Ethereum (ETH) saw a similar decline.
Markets Reassess December Rate Cut Odds
Just a few hours after Powell’s speech, the chances of a rate cut at the Fed’s next meeting in mid-December fell to 62%, according to the CME FedWatch tool. Just one day ago, those odds stood at 83%.
Traditional markets have also pulled back from their recent hawkish tone, led by a 0.75% drop in the Nasdaq to session lows just minutes before the trading day closed.
Crypto Remains Sharply Higher on the Week
Despite the intraday pullback, crypto markets of course remain sharply higher recently: Bitcoin is still up 15% on the week, while names like Cardano (ADA), Ripple (XRP), Near Protocol (NEAR) and Stellar (XLM) are higher by 20%-40%.
“The crypto rally was due for a breather after the massive surge we’ve seen since the election,” a senior crypto analyst told us. “Powell’s comments were the perfect excuse for some short-term profit taking. But the underlying bullish narrative remains intact.”
Market participants will be closely monitoring upcoming economic data and Fed speeches for clues on the central bank’s rate path. The next major event is the November jobs report on December 2nd.
Ripple Bucks the Trend
Bucking the broader crypto pullback was a 13% advance for Ripple (XRP), possibly buoyed by remarks from SEC Chair Gary Gensler that could be interpreted as his plans to quietly step down following Trump’s victory.
The SEC’s lawsuit against Ripple alleging that XRP is an unregistered security has been a major overhang for the token. Speculation that a Trump-appointed SEC chair could drop or settle the case on favorable terms has contributed to XRP’s recent outperformance.
“If Gensler steps down, it would be a very positive development for Ripple and XRP,” the head of an institutional crypto fund explained. “It increases the chances of a resolution to the SEC lawsuit that removes the regulatory uncertainty.”
With the Fed now somewhat less likely to step on the gas with rate cuts and a potential change in leadership at the SEC, the cross-currents in the crypto markets heading into year-end will be fascinating to watch. Buckle up, it could be a bumpy ride.
