Risk assets have been hit hard as Fed Chairman Jerome Powell remains hawkish on inflation and monetary policy.
Bitcoin (BTC) and altcoins plummeted on August 26 after the US Federal Reserve issued dovish comments on economic policy.
Risk assets were hit hard across the board with U.S. stocks losing about $1.25 trillion in a single session.
Analyst: Powell abandons ‘soft landing’ rhetoric
With Fed Chairman Jerome Powell’s comments showing that despite recent data showing that inflation is already slowing, bigger rate hikes are still on the negotiating table, investors rushed to reduce risk.
“Restoring price stability will likely require maintaining restrictive policies for some time. The historical evidence strongly cautions against premature policy easing,” Powell said at the annual economics symposium in Jackson Hole.
The S&P 500 fell 3.4% on the day, its lowest level since the end of July. The Nasdaq Composite index repeated this movement and continued to lose, shedding 4%.
Overall, the US stock market has lost more value than the total market capitalization of bitcoin and altcoins combined.
According to data from Cointelegraph Markets Pro and TradingView, the total cryptocurrency market capitalization dropped overnight from $1.029 trillion to $936.87 billion, down 8.95%.
Candlestick chart of the total capitalization of the cryptocurrency market for 1 day. Source: Trading View
While some have argued that Powell’s words were not an important area to consider in terms of future Fed policy, others have noted that old narratives are slowly being shed when it comes to inflation forecasts.
Holger Zschepitz, a popular market columnist for the German media magazine Die Welt, believes the speech is “all hawkish” and Powell “leaves the understated”.
“The hawkish moves were his admission that it would likely take pain to bring inflation down – no more soft landings, suggestions that rates should be above neutral,” he added on Twitter.
Powell also said that the decision on how much to raise interest rates in September “will depend on the combination of incoming data and changing outlook.”
Meanwhile, the latest readings from CME Group’s FedWatch tool showed that most agreed with a 75 basis point increase in September, reflecting the July move.
Fed rate target probability chart. Source: CME Group
No hodler can hide the pain
However, crypto investors have not been able to avoid the immediate impact of the collapse of risky assets.
Related: Price Analysis 8/26: BTC, ETH, BNB, XRP, ADA, SOL, DOGE, DOT, SHIB, MATIC
BTC/USD lost as much as 8.8% at one point, dropping below $20,000 for the first time since July 14 before recovering and lingering on the sand just above the significant line.
BTC/USD hourly chart (Bitstamp). Source: Trading View
For altcoins, the picture was no less bleak. Ether (ETH), the largest altcoin by market cap, is down almost 14% on the day.
At the time of this writing on August 27, ETH/USD was hovering around $1,500, negating the entire monthly gain. The price correction included a fresh warning from popular trader Crypto Ed about a possible further downtrend.
“Could drop to $1200-$1300 before a significant bounce occurs,” reads part of his latest Twitter update.
ETH/USD 1-day candlestick chart (Binance). Source: Trading View
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