The global cryptocurrency industry is awaiting the outcome of the Federal Reserve Bank of Kansas City’s Economic Policy Symposium in Jackson Hole, Wyoming beginning today. The hawkish stance from the Fed along with consecutive rate hikes in 2022 has spooked the global markets, lately. What will the Fed meeting mean for crypto?
As millions of Americans struggle with surging inflation, top Federal Reserve officials will discuss ways to combat rising prices of basic goods attempting to steer the U.S. away from a recession. The Fed’s annual summer policy summit will seek to assess whether Fed Chairman, Jerome Powell, will be signalling a more hawkish or dovish heading into September’s Federal Open Market Committee (FOMC) meeting. In July, the Fed had raised interest rates by 0.75%, leading to a fourth consecutive increase since the start of the year.
Our annual #JacksonHole Economic Policy Symposium will take place Aug. 25-27 in Jackson Hole, WY. The 2022 event, which marks the symposium’s 45th year, will focus on the theme “Reassessing Constraints on the Economy and Policy.” https://t.co/6SAJmA4Xmh #JacksonHole2022 pic.twitter.com/CewHpbcyHT
— Kansas City Fed (@KansasCityFed) August 24, 2022
Crypto will Continue to Lose Ground in the Short Term
With a sharp correction in global equity markets, particularly in tech stocks, the crypto cart followed the carnage and eroded wealth worth $2 trillion from the global crypto market cap. However, crypto traders are showing some signs of recovery, but the volumes have remained muted as the traders are eyeing Fed’s commentary on the issue. The summit in Jackson Hole, will likely frame the crypto narrative into the beginning of the next business cycle.
David Duong, head of institutional research at Coinbase, indicated that Bitcoin (BTC) along with other digital tokens could continue to lose ground in the short term. He urged that aggressive rate hikes are not positive for crypto prices, suggesting that market choppiness will likely continue in the short term. In a statement, Duong said,
“Fed Chair Jerome Powell will likely try to take a more measured approach in Wyoming and emphasize that the tightening cycle isn’t over yet. The Fed’s monetary tightening has roiled the cryptocurrency market this year.”
Will the Fed Take a Hawkish Stance for Future Interst Rate Hikes?
Experts believe, Powell, could further elaborate on the Fed’s hawkish stance and plan for future interest rate hikes. This macro uncertainty has kept the institutional investors away from the crypto markets. According to, CoinShares, crypto investment products recorded weekly volumes of $1 billion, which is nearly 55% lower than the yearly average. However, interestingly, Bitcoin (BTC), Ethereum (ETH), and most cryptocurrencies rose ahead of the Fed summit. Bitcoin (BTC) has been trading above its critical resistance level at $21,500 in the past 24 hours. Edul Patel, CEO and Co-founder, Mudrex, added,
“This small upside move might give the market players a little confidence in a short-term bearish to bullish momentum.”
Risky assets like stock and crypto have been heavily correlated since the start of 2022. Both have been moving in tandem grappling to gain any momentum this year as investors are pulling away in response to rising interest rates, surging inflation, and a potential recession. If the stock market dips because of the rate hike this week, the crypto market likely will too and vice versa. Edward Moya, a senior market analyst at Oanda, explained,
“The majority of crypto watchers are still awaiting further weakness. As global recession calls grow, the focus will switch to how soon the Fed will be cutting rates.”
Crypto may not be Discussed in the Summit
Joshua Fernando, CEO of eCarbon, a blockchain tech company focused on carbon emissions allowances, claimed that the combination of slowing price pressures and a steep decline in some sectors of the economy sensitive to higher interest rates, particularly housing has spurred speculation the Fed may soon ease up on interest rate hikes. Doing so could ease concerns of the Fed pushing the U.S. into a recession by raising rates to a point that stalls economic growth. He continued,
“75 basis points appears to be the consensus, so if we see something notably higher and it kills the equity market, then I would expect the crypto market to follow suit. Vice versa in the lower rate increase case. More important will be the guidance the Fed gives. If the Fed signals strong rate hikes through 2023, expect more pain in the markets.”
However, David Beckworth, a former international economist at the U.S. Treasury Department, suggested that Powell might exchange views into the issue of stablecoins and digital tokens linked to government-issued currencies such as the U.S. dollar as the topic was already discussed in last month’s Fed meeting minutes. He also emphasized,
“But given the importance of monetary policy at Jackson Hole, it’s unlikely that crypto will come up in the speech this time.”
Investors Should Focus on Long Term
Analysts believe that the macro variables which are the most closely aligned with the poor performance of Bitcoin (BTC), the strength of the dollar correlates pretty tightly. So that is certainly something that investors globally have their eyes set on. Crypto investors need to have a long-term outlook and patience, said the market experts. In the short term, crypto markets are poised to show wild volatile swings. Pratik Gauri, founder of 5ire, a blockchain network, said,
“Both the crypto investing and associated innovation are becoming mainstream. Investing in crypto as a value proposition or a value building vehicle is not going to be affected anytime soon.”
