Federal Reserve Chair Powell's Testimony Leaves Crypto Markets in Limbo Ahead of July Data

Federal Reserve Chair Jerome Powell’s testimony on Capitol Hill has left traders in risk assets with a critical question: will the summer end with a crypto breakout or a macro-driven crash? Powell emphasized that while inflation has decreased from its mid-2022 peaks, it remains elevated. He noted that the Federal Open Market Committee is prepared to wait and observe the economy before making any policy adjustments.

For crypto markets, which are highly sensitive to policy guidance, the next four weeks are pivotal. These weeks are marked by key economic indicators, including the 12 July Consumer Price Index (CPI) release and the 19 July payrolls report. These reports will determine whether the July FOMC meeting brings relief or a reality check for the markets.

Powell’s cautious stance is contrasted by a public split within the Federal Reserve Board. Governors Michelle Bowman and Christopher Waller, both appointed by Trump, argue that tariff-related price increases are likely temporary and should not hinder an early rate cut, potentially as soon as the 30 July meeting. However, seven of their colleagues project that policy will remain unchanged through December. Powell himself stated that there is no rush to act, given the economy's current strength.

Market reactions to Powell’s testimony included a flattening of the front end of the yield curve. Two-year Treasury yields fell to 3.806 percent, while the benchmark 10-year yield dipped to 4.285 percent, both lows not seen since early May. This movement was driven by Powell’s testimony and a surprise cease-fire in the Middle East, which boosted a global “risk-on” sentiment. However, expectations for July remain balanced, with traders placing a roughly 19% probability on a first 25-basis-point cut, according to CME FedWatch.

Crypto markets responded to these cross-currents rather than the headline. Bitcoin, which had dropped to $99,000 on Monday, rebounded to $106,000 by Wednesday morning, mirroring the recovery in equities and high-beta currencies as the dollar weakened on falling yields. Ethereum held above $2,400, despite Powell’s tone being described as hawkish. The broader crypto complex moved in sympathy, with BNB surpassing $644 and Solana stabilizing near $146.

Veteran traders on X distilled the stakes. Pseudonymous analyst Byzantine General noted, “We got a lot of clarity now. All eyes on the July CPI print.” Nic from CoinBureau added that July “is in play—maybe—but nothing’s locked in,” as Powell’s testimony brought no big surprises. Jim Bianco commented, “Trump appointees Waller and Bowman are suggesting a July cut. Powell is reiterating ‘no.’ Will the July FOMC meeting see at least two dissenters?”

Powell’s “watch and wait” approach has given the FOMC four more weeks of flexibility. If July’s inflation data confirms a downward trend, the policy door could open, potentially leading to a full-blown crypto rally. Conversely, if inflation does not decrease, a crash could follow swiftly. As Byzantine General put it, the market “got clarity.” What it did not get is comfort.