The interview with the Fed chair Jerome Powell at the Economic Club of Washington sparked sharp swings in digital assets.
During the discussion, Powell noted the start of disinflation in the goods sector and the expectation that a similar trend would take root in the housing market. He had previously articulated this thesis at the press conference following the Fed meeting.
“We expect that 2023 will be a year of substantial decline. I anticipate that it will take time not only this year but next year to reach the Fed’s 2% inflation target,” Powell said.
The day before the speech, investors did not rule out more hawkish comments from the Fed chair in light of the sharp rise in employment in the U.S. economy for January.
Rather than signals of a need to fight inflation, the dovish tone at the outset of the interview alleviated such fears, boosting risk-asset momentum.
Bitcoin rose 1.5% in the next 15 minutes, to $23,350, Ethereum by 2.4%, to $1,675.
In the following 30 minutes, the major cryptocurrencies shed 2.5% and 3.2% respectively, reacting to Powell’s comments on unemployment. The head of the monetary authorities said he expects cooling of the labour market, adding a reminder that the policy rate would rise to a “sufficient” level with room for further hikes.
Many investors welcomed the pullback as an opportunity to rebuild long positions. Market participants could reassess the statements and see no fundamentally new elements after the strong jobs report last Friday.
As of the morning of February 8, Bitcoin and Ethereum had retraced to the peak levels reached during Powell’s remarks. Daily gains stood at 1% and 2.4%, respectively, according to CoinGecko.
On the daily chart, the moving averages formed a «golden cross» — a harbinger of a positive trend.
Earlier, Glassnode noted a transition from bear to bull market.