Jerome Powell, the Head of the Federal Reserve of America, has just delivered his speech at 00:10 WITA on April 4, 2024. In his speech, there were statements indicating a change in the outlook of the Federal Reserve, moving away from his statements in 2023.
One highlighted aspect of his speech is the fact that Jerome Powell has a new view on the American economy. In his speech, Jerome Powell stated that America is still not ready for a reduction in benchmark interest rates, so the Federal Reserve will not rush to lower interest rates.
Jerome Powell’s Speech
This statement diverges from the initial plans in 2023, where in his speeches during that year, Jerome Powell mentioned that 2024 would see a decrease in benchmark interest rates, with one expected between the end of the first quarter and the beginning of the second quarter. Previously, the majority of investors and traders had expected a reduction in benchmark interest rates in April 2024.
As a result, many were disappointed with Powell’s statements, which are seen as a sign of a shift from an Expansive or Dovish stance back to a Contractionary or Hawkish stance. There are many concerns that if the Federal Reserve becomes hawkish again, it could mean a potential downturn for most risky assets, similar to the conditions in 2022. This sentiment is affecting not only crypto but also stocks, with most risky assets consolidating and moving downwards due to concerns about the still uncertain economy.
Following this speech, America appears poised to bring volatility to the market, which could provide additional confirmation of a potential change in the Federal Reserve’s outlook.
Currently, the American government’s view, especially from the President, is that the economy has begun to improve and is likely to continue recovering. However, data from previous publications proves otherwise, so the majority of traders and investors remain cautious. Looking ahead, most are wary of upcoming publications such as the non-farm payrolls (NFP) data and unemployment data. Both of these data sets generally cause high volatility in the financial markets as they impact the short-term value of the US Dollar.
As a result, by the end of this week, there is a possibility that most risky assets will continue to decline as short-term traders and investors opt to secure their funds before considering new purchases.
Crypto Market Reaction
In light of these conditions, the crypto market is also following the movement of most risky assets, with an overall correction in market capitalization. Market capitalization reflects the total funds stored in an asset or market.
Based on the provided data, it’s evident that the discussed market capitalization pertains to the overall crypto market. Since the beginning of this week, with many news releases and data publications from America, the crypto market capitalization has seen a significant decline, reaching up to 8.75%.
This correction indicates that ahead of the data releases, the majority of investors are liquidating their funds to avoid upcoming volatility. Moreover, this correction is not yet complete, so it’s likely that the crypto market will continue consolidating and moving negatively into the next week.
This is primarily due to the anticipated NFP and unemployment data, meaning the market will only calm down once this data is released. Overall, traders and investors must remain cautious during the first two weeks of each month as there are usually many data publications.
However, the crypto market may not always follow this pattern if there’s a sudden positive sentiment originating from crypto market participants themselves, leading to movements diverging from the majority of risky assets.