Bitcoin and Other Major Cryptocurrencies Bounce Back After Powell Sets the Stage for Rate Cuts

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

Major cryptocurrencies bounced back on Friday, reversing earlier losses as Federal Reserve Chair Jerome Powell's speech at the annual central bankers' gathering in Jackson Hole set the stage for the central bank to start cutting interest rates in September.

Speaking on Friday, Powell said he feels more confident about getting inflation under control after it peaked at a four-decade high in 2022.

Markets fully priced Powell to hint at a rate cut for the Fed's September meeting, though his comments were seen as slightly more dovish than expected.

Following Powell's speech, Bitcoin rose by over 1.5%, hitting $61,900 after briefly spiking above $62,000.

Meanwhile, Ethereum rose by 2.9% to $2,685, and Solana rose by 2.4% to $147. Polkadot rose by 2.7% on the day.

Traditional markets also saw solid gains on Friday, with the Nasdaq rising by 1.7%, the S&P 500 by 1.2%, and gold by 1%.

The 10-year Treasury yield dropped by five basis points to 3.80%, while the U.S. dollar index slipped by 0.6%.

Like tech stocks, Bitcoin tends to benefit 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, which affected both Bitcoin and tech stocks. But 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 showing a 67.5% chance of a 25 basis point cut. As of Friday morning, the prediction algorithm placed the odds of a half-point cut at 32.5%.

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