Bitcoin and other major cryptocurrencies bounced back on Friday, reversing earlier losses after Federal Reserve Chairman Jerome Powell set the stage for the central bank to start cutting interest rates in September.
Speaking at the high-profile annual gathering of global central bankers in Jackson Hole, Wyoming, Powell said that he feels more confident about getting inflation under control after it peaked at a four-decade high in 2022.
Even though markets fully priced Powell to hint at a rate cut for the Fed's September meeting, his comments might have been a bit more dovish than expected.
Right after his speech, Bitcoin jumped over 1.5%, hitting $61,900 after a brief spike above $62,000. Meanwhile, Ethereum's price rose 2.9% to $2,685, and Solana's price added 2.4% to $147. Polkadot price was up 2.7% on the day.
Traditional markets also saw solid gains as the Nasdaq rose by 1.7%, the S&P 500 went up 1.2%, and gold increased by 1%. Moreover, the 10-year Treasury yield dropped five basis points to 3.80%, and the U.S. dollar index slipped by 0.6%.
Similar to tech stocks, Bitcoin often gains from lower interest rates and increased market liquidity.
There's been an inverse relationship between interest rates and crypto prices. When the Fed hiked rates in 2022, it drained market liquidity, affecting both bitcoin and tech stocks. On the other hand, when the Fed cuts rates, it injects liquidity back into the market, which tends to favor riskier assets like bitcoin.
Crypto-related stocks also performed well throughout the day. Coinbase (NASDAQ:COIN) saw a 5% increase, and MicroStrategy Incorporated (NASDAQ:MSTR) added 7% after dropping around 8% earlier in the month. In the mining sector, Iris Energy and CleanSpark (NASDAQ:CLSK) rose slightly by 2% and 4%, respectively. Marathon Digital (NASDAQ:MARA) was up 6.5%, and Riot Platforms (NASDAQ:RIOT) gained 3%.
Markets are currently pricing a quarter-point rate cut by the Fed at its next meeting, with the CME FedWatch tool giving it a 67.5% chance. As of Friday morning, the prediction algorithm also placed the odds of a half-point cut at 32.5%.