Financial markets are reacting positively to the Fed’s latest announcement, including the cryptocurrency market.
In recent hours, the most closely watched news in the U.S. stock market has been the latest statement from Federal Reserve (Fed) Chairman Jerome Powell. He finally made the long-awaited announcement regarding interest rate adjustments.
Specifically, in an interview at the Jackson Hole financial conference, Powell said:
“It’s time to begin cutting interest rates. The direction for adjustments is clear, but the timing and amount will depend on actual data, future outlooks, and risk assessments.”
Federal Reserve Chair Jerome Powell laid the groundwork Friday for interest rate cuts ahead, though he declined to provide exact indications on timing or extent. https://t.co/xe3ScXNRXG pic.twitter.com/wFvAaAdD6u
— CNBC (@CNBC) August 23, 2024
Financial analysts predict there is a 67.5% chance that the Fed will reduce rates by 0.25% at the upcoming FOMC meeting on September 19, while the probability of a 0.5% cut is 32.5%.
The Fed’s current interest rate is 5.5%, the highest in two decades, and has remained unchanged since July 2023. This was the Fed’s response to out-of-control U.S. inflation during 2020-2021, a period when the country injected large amounts of money to support businesses and citizens amid the COVID pandemic, which disrupted the world’s largest economy.
The Fed’s interest rate adjustment history over the past 10 years. Image: Trading Economics (08/24/2024)
U.S. inflation in July 2024 stood at 2.9%. While it has not yet returned to the Fed’s 2% target set when rates were increased, it has significantly declined from the peak of 9.1% in mid-2022, the highest level in 40 years.
Major U.S. stock indices rose 1-1.8% on August 23, reflecting investor optimism about the end of the high-interest-rate period.
Meanwhile, Bitcoin has seen a strong recovery, climbing from $60,800 to $64,955, returning to early August levels before a dramatic drop to $49,000.
1-hour chart of the BTC/USDT pair on Binance at 08:55 AM on 08/24/2024
Top 100 altcoins also showed clear gains thanks to this news, with many coins rising between 5% and 20% in the past 24 hours.
Price fluctuations of the top 100 cryptocurrencies by market cap, screenshot from CryptoBubbles at 09:00 AM on 08/24/2024
Liquidations in the crypto market over the past 12 hours have exceeded $150 million, with short positions accounting for 79%.
Liquidation data on the crypto derivatives market, screenshot from CoinGlass at 08:55 AM on 08/24/2024
Notably, one investor had a $11.5 million short position on ETH liquidated on Binance as Ethereum’s price rose by more than 4.5% on the morning of August 24.
