The interest rate for the United States in February 2024 has been set at 5.25% to 5.5%, remaining unchanged from the previous month.
Despite this accommodative or dovish interest rate policy, high-risk assets like cryptocurrencies have shown a negative response, experiencing a downward trend.
Publication of the U.S. Interest Rate
The US interest rate was officially published accompanied by a speech from Jerome Powell, the Head of the U.S. Central Bank.
While the set interest rate aligned with market predictions, the surprising aspect was the market reaction following Powell’s speech.
Previously, the market anticipated the interest rate to remain between 5.25% and 5.5%, aligning with the U.S. Central Bank’s dovish stance expressed around October 2023.
This dovish outlook was considered positive, suggesting that the interest rate would not rise and might potentially decrease in the late first quarter, signaling an improvement in the U.S. economy.
An improved U.S. economy typically leads to increased purchasing power, potentially prompting a rise in high-risk asset prices as consumers regain the ability to meet basic needs.
Unfortunately, the current market sentiment contradicts these expectations, as most high-risk assets, including the stock market and cryptocurrencies, are observed to be moving downward.
The correction is attributed to Jerome Powell’s speech, abruptly altering the U.S. Central Bank’s 2024 plans. While a rate cut was expected in March 2024, Powell’s speech conveyed the opposite.
In his speech, Powell stated that the U.S. Central Bank would not be reducing the interest rate due to the current uncertain inflation conditions, dampening market expectations of economic recovery.
Jerome Powell Influences Market Sentiment
Powell’s statement triggered a substantial increase in selling volume for high-risk assets, coinciding with a resurgence of the U.S. Dollar.
A rising U.S. Dollar amid high inflation is considered unfavorable, maintaining negative sentiment towards the U.S. economy.
Data reveals that U.S. inflation increased immediately after the publication of the U.S. Central Bank’s plans. From November 2023 to December 2023, inflation began to rise again, raising concerns that the U.S. economy could repeat the mid-2023 cycle when inflation increased after a gradual decline.
This situation likely prompted Powell to retract the anticipated interest rate cut in March 2024 that was planned around October 2023.
Post-Powell’s statement, data indicates a decline in investor confidence regarding the anticipated March 2024 interest rate cut, dropping from 60% to 35.4%.
As a result, high-risk assets may continue to experience consolidation or prolonged correction movements. For cryptocurrencies, there is currently no new positive sentiment that could significantly drive prices upward, as observed at the end of 2023.
Considering the upcoming Bitcoin Halving in mid-2024, and historical crypto movements showing a decline or stagnation leading up to halving events, Powell’s speech could be the primary catalyst for the early signs of a stagnant crypto market.
However, there is no conclusive data suggesting that the correction will persist, as overall market conditions remain neutral in the long term, despite short-term indications of larger selling volumes, especially in derivative markets.