Bitcoin News Today: Bitcoin Surges as Fed Signals Dovish Shift in Policy Tone

The Federal Reserve's recent policy signals have sent ripples through the cryptocurrency market, with Bitcoin and related assets experiencing a notable surge. In a speech at the Jackson Hole Economic Symposium, Fed Chair Jerome Powell indicated openness to rate cuts as soon as September, catching some market participants off guard. Prior to the speech, investors had positioned themselves for a hawkish stance from the Fed, but the shift in tone prompted a reversal in expectations. As of Friday afternoon, prediction market platforms like Polymarket showed a 80% probability of a 25 basis point rate cut in September, up from 56% before the market opened. The CME FedWatch tool also reflected a jump in odds, from 75% to 87%.

Bitcoin prices surged in response, climbing from below $112,000 to around $116,500, while proxy stocks such as Strategy (MSTR) and Coinbase (COIN) also rose sharply. The renewed optimism among investors stemmed from the expectation that lower interest rates would boost risk appetites, thereby favoring high-volatility assets like cryptocurrencies. Powell highlighted in his prepared remarks that the unusual balance in the labor market—marked by a decline in both the supply and demand for workers—suggested rising downside risks to employment. He further stated that shifting risk balances might warrant an adjustment in monetary policy. This nuanced language, interpreted by some as "dovish," was welcomed by crypto market participants who view lower rates as supportive for asset prices.

Bitcoin’s growing influence in the global monetary system was also underscored, as it now accounted for approximately 1.66% of global money. This figure includes aggregate M2 money supply data for major fiat currencies, minor currencies, and gold, according to River, a Bitcoin financial services company. With a current market cap of around $2.29 trillion, Bitcoin has continued to claim a larger share of global money as central banks expand their fiat supplies through monetary easing. This trend has drawn investors seeking alternatives to fiat currencies that are losing purchasing power due to inflation and quantitative easing.

The market’s reaction to the Fed's signals highlights the strong correlation between global liquidity levels and crypto prices. Historically, digital assets have tended to appreciate during periods of monetary expansion, a pattern that has persisted in recent months. This dynamic is particularly relevant given the Fed's ongoing evaluation of its policy stance, which includes a cautious approach to maintaining price stability while navigating a complex economic environment. Analysts like Tom Lee from Fundstrat noted that the speech was in line with expectations, reinforcing the view that the Fed could pivot to a more accommodative posture if economic conditions warrant it.

In parallel, the Fed's policy decisions are influencing not just crypto but broader financial markets, including stablecoins and regulatory frameworks. In the U.S., the newly enacted GENIUS Act aims to bring clarity to the stablecoin sector by establishing a federal framework for payment stablecoins. This move comes as Europe is rethinking its digital euro strategy in response to U.S. regulatory developments. The EU’s Markets in Crypto-Assets Regulation (MiCA) provides a more comprehensive framework, covering a wide range of crypto assets and services, and offers a passporting mechanism that allows firms authorized in one member state to operate across the EU. These regulatory developments are shaping the competitive landscape for digital assets and influencing how global investors allocate capital.

Source: [1] Bitcoin and Crypto Stocks Surge as Powell's Rate-Cut Hint ... (https://www.investopedia.com/bitcoin-and-crypto-stocks-surge-as-powell-rate-cut-hint-revives-risk-appetite-11795898) [2] BTC climbed to 1.7% of global money before Fed chair ... (https://cointelegraph.com/news/btc-1-7-global-money-fed-chair-signals-rate-cut) [3] MiCA vs. GENIUS Act: How Crypto Laws Differ in Europe ... (https://www.ccn.com/education/crypto/mica-vs-genius-act-how-crypto-laws-differ-in-europe-and-the-us/)