The upcoming Federal Reserve meeting on August 20 could decide how the crypto market moves in the weeks ahead. On top of it, Fed Chair Jerome Powell’s Jackson Hole speech may hint at a possible September rate cut.
Many crypto experts are now wondering how digital assets might react to the Fed’s next decision.
Fed Signals a Rate Cut Is Coming
The Federal Reserve has kept its interest rate target at 4.25%–4.50%, but not without disagreement. Some policymakers are calling for a 25-basis-point cut, and the CME FedWatch Tool now shows an 83.1% chance of that happening.
At the same time, July’s Consumer Price Index came in hotter than expected, dampening hopes for faster easing. Job growth has slowed, inflation is still above the Fed’s 2% target, and markets are adjusting their expectations for bonds and other assets.
August Expectations: Volatility, Risk, and Opportunity
The crypto market has historically been sensitive to Fed policy changes. A look back at July’s FOMC meeting, when rates stayed unchanged, Bitcoin quickly jumped above $124,000, showing how sensitive traders are to signs of easing.
If the FOMC delivers a rate cut, history suggests a fresh burst of optimism for risk assets:
Liquidity is king: Lower rates usually spark a rush of capital into speculative assets, crypto included. Expect altcoins and DeFi platforms to see surges in both price and trading volume.
But surprises cut both ways: Should Powell keep rates steady or reinforce a hawkish stance, crypto could jolt lower, reflecting the sector’s outsized volatility relative to stocks and bonds.
Meanwhile, Bitcoin is trading near $115,753, while Ethereum hovers around $4,290. These levels leave room for dramatic moves if the Fed turns dovish.
Fed Chair Powell’s Speech
The real focus is on Fed Chair Jerome Powell’s speech at the Jackson Hole summit this Friday. Meanwhile, traders will be listening closely for any hint that the Fed may cut borrowing costs at its September meeting.
However, Powell could still cool down expectations for a rate cut.
He may not say the September 17 cut is completely off the table, but he could stress that recent inflation data is worrying and not in line with the Fed’s 2% target.
Until his speech, it’s time to wait and see.
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FAQs
A rate cut could spark a rally in crypto, as lower rates typically increase liquidity and investor appetite for riskier assets. A hawkish stance might cause a drop.
Traders will be listening for any hints about a September rate cut. Powell’s speech at the Jackson Hole summit could signal the Fed’s future monetary policy and cause market volatility.
Historically, when the Fed has shown signs of easing, risk assets like Bitcoin have seen a jump. Conversely, a hawkish stance has often led to a decline in crypto prices.
