- Jerome Powell has caused a market decline with his concerns
- We probably won’t get three rate cuts in next year
- US markets lost nearly $1.5Tb, Bitcoin fell below $99K
- However, the global trend of Bitcoin adoption is holding for now
- Strong statements are heard from major political figures in the EU
- Funds continue their buying, building speed and quantity
Jerome Powell has shaken up the markets with concerns about the 2025 economic numbers. US markets lost almost $1.5T, and Bitcoin fell below $99K with other crypto, although it has returned to major support.
Meanwhile, the global trend of Bitcoin adoption remains, and more voices are being heard from the European Union about the need to keep up with the US in its crypto initiatives, especially the potential creation of a Bitcoin reserve.
And amidst all of this, investment funds and large crypto companies continue to accumulate Bitcoin, seemingly oblivious to Jerome Powell’s statements and market fluctuations.
Let’s Take a Closer Look at the Impact of Jerome Powell’s Statements on Bitcoin
The FED cut the rate by 25 basis points, but 97% and later 99% of market participants expected it, so this event was already in the Bitcoin price before the decision was announced.
From this we can assume that the markets’ reaction was not related to the rate cut, but to the FED’s forecasts for 2025, which became less optimistic than expected.
First, the FED has revised the number of planned rate cuts for the coming year – instead of three or four cuts, Jerome Powell expects only two cuts totaling 50 basis points for the whole of 2025.
In addition, the FED raised its inflation expectations for 2025, more specifically at 2.5% at the end of 2025, although it had previously forecast 2.1%.
Meanwhile, 1 of 19 FED officials expect no rate cuts in 2025, three officials see as many as two rate cuts instead of four, and only five officials are currently forecasting three or more interest rate cuts.
Naturally, the market now fears a repeat of the 1970 scenario where we got a second inflationary spiral much worse than the first, and like Federal Reserve Bank of Cleveland President Beth Hammack with the FED decision until the 2% inflation target is reached.
It is likely that next year interest rates will remain higher than expected they will not fall as fast as some thought, which has shaken up the markets, but not everything is as clear cut as it may seem.
Finally, the last point in Jerome Powell’s speech is to answer the question of Bitcoin and whether you see value or benefit from the US government creating a Bitcoin reserve.
“You know, we weren’t allowed to own Bitcoin. The FED doesn’t need to change legislation, these are things that Congress should be looking at. We FED is not looking to change legislation.”
Many take this answer as negative, however, it is up to interpretation and one could also take it to mean that Congress could authorize the US to hold Bitcoin and he allows such a thought. However, Jerome Powell could only clarify that it is not the FED that will hold Bitcoin if the US Bitcoin Reserve is adopted but the Treasury. So that is why questions should not be asked of him since the FED as a whole is not involved in this issue.
Therefore, even if the FED has clearly disassociated itself from Bitcoin, that would not mean that the national Bitcoin reserve is canceled. Moreover, Ohio, for example, became the third U.S. state to introduce legislation for a strategic Bitcoin reserve, and now the Bitcoin map of the United States looks like this.
On a larger scale, the global narrative for Bitcoin now is acceptance at the state level, for example, the Dutch government has received an open letter about the creation of a national Bitcoin reserve.
Recall that back in 2021 the Netherlands was talking about a complete ban on mining, trading, and investing in Bitcoin, but three years later they are starting to make unambiguous and concerted initiatives for a national Bitcoin reserve.
MEP Sarah Knafo called on the EU to abandon the digital euro and create a strategic Bitcoin reserve, thereby moving away from the totalitarian temptations of the European central bank, from national sovereignty-violating organizations like the International Monetary Fund, from central bank digital currencies that will control every aspect of citizens’ lives including EC citizens, from slowing down the development of taxes and controlling cryptocurrency and crypto enthusiasts.
Another straightforward speech was made by former German finance minister Christian Lindner.
He said that it is time to recognize the possibilities of Bitcoin from Germany:
“Dear colleagues, I have not heard anything from you about what is happening in the world, about the innovations that are passing Germany by. Neither from the Chancellor, nor from the Minister of Economic Affairs, nor the Leader of the Opposition, I have not heard about the fact that new crypto-friendly policies are being implemented in the US and that the US is already seeking to take advantage of the benefits that could come to us thanks to Bitcoin. And I don’t hear anything about that in the centerpiece debate. What an omission, what opportunities are passing us by.”
It’s hard to imagine how disappointed he probably is with the German government’s decision to get rid of 50,000 bitcoins priced between $50-60K since it’s already caused Germany to lose almost $3B.
A rather ironic post at X gave Eric Fry on the subject:
So we can assume that Jeremy Powell’s statements probably don’t influence the Bitcoin price so dramatically because interest rates don’t play such a big role in this cycle.
It is likely that this cycle is about acceptance at the state level and that will not change because of interest rates, unlike the last cycle when the market depends on retail investors and billionaires who were focused on the US interest rate.
Of course, there could be a major sell-off in spot Bitcoin today and that could be one of the reasons for this correction, or long-term holders could be selling because they are concerned about the future of the economy and interest rates and there is still an opportunity here to lock in 350% gains.
But as you can see, since the end of November we have been moving within the range of these two moving support and resistance. And since we are not holding this moving support, Bitcoin price may fall to the next one which is at around $93K, but even that will not mark a bull market break. The next range of good support is in this area around $85K even a drop to these marks does not signify a move into a bear market.
Note, right now Bitcoin investors are sitting on an amount of unrealized gains of $1.3T. A record amount of profit they have yet to lock in.
B however, the market still continues to absorb sales from those who lock in these gains and turn them into realized gains sellers are still exerting strong pressure yesterday another 40,000 BTC were sold while the market absorbed almost 1,000,000 BTC.
BlackRock and other ETFs like Microstrategy, continue to buy, crypto mining company MARA bought 15,574 BTC Worth $1.53B meaning they are all buying back Bitcoins from long-term holders perhaps some long-term holders are moving their Bitcoins for various reasons.
Conclusion
Of course, as we keep repeating, many scenarios in the market could go down, and even more factors in favor of certain scenarios. However, it is probably premature to say that the bull cycle is over, and the cycle could go far beyond the economy continuing to receive policy stimulus.
However, a very big factor is the new US administration, and how unambiguous and consistent their crypto initiatives will be, which if they happen, will likely make many a force to be reckoned with.
Be aware of stay tuned.
