In the early morning of June 19th, Beijing time, the Federal Open Market Committee (FOMC) of the Federal Reserve wrapped up its monetary policy meeting, followed by a press conference held by Chairman Powell. The decisions made at this meeting and Powell's speech stirred significant waves in the financial markets, and the cryptocurrency market was no exception; the impact is worth in-depth analysis.
Review of the Federal Reserve's Decision and Powell's Speech Highlights
The Federal Reserve decided to maintain the federal funds rate target range at 4.25% - 4.50%, marking the fourth consecutive time the rate has remained unchanged. According to the dot plot, officials still expect two rate cuts in 2025, consistent with expectations from December last year and March this year, but there is a more 'hawkish' view internally regarding rate cuts this year.
Powell emphasized in his speech that the Federal Reserve will carefully assess subsequent data, the changing outlook, and the balance of risks when considering the magnitude and timing of further adjustments to the federal funds rate target range. He pointed out that commodity inflation will be more pronounced this summer, and the Fed will only begin to cut rates when it is confident that inflation is declining. He also criticized Trump's tariff policy for potentially increasing inflation. Regarding when to cut rates, Powell stated that the Fed would act only when it is confident that inflation is declining.
Direct Impact on the Cryptocurrency Market
1. Increased Short-term Price Volatility: The cryptocurrency market is extremely sensitive to signals from the Federal Reserve. During the meeting and the speech, the prices of mainstream cryptocurrencies such as Bitcoin and Ethereum experienced significant fluctuations. Given that there were already many speculations regarding the direction of the Federal Reserve's policy, the information released by the decisions and the speech led investors to reassess the investment value and risks of cryptocurrencies. When Powell's stance was more 'hawkish', emphasizing concerns about inflation and a cautious monetary policy attitude, some risk-averse investors may choose to sell their cryptocurrencies, leading to price declines; conversely, when the market interprets some potential easing signals, it attracts some investors to enter the market, pushing prices up. For example, during Powell's speech, Bitcoin's price rapidly fell at one point, then rebounded due to differing interpretations of his remarks by the market.
2. Impact on the Stablecoin Market: Stablecoins, which are cryptocurrencies pegged to fiat currencies, are closely tied to the US dollar. The Fed's monetary policy affects the liquidity and value of the dollar, thereby impacting stablecoins. If the Fed maintains the current interest rates or adopts a more 'hawkish' policy, the attractiveness of the dollar may increase, leading some capital to flow out of the stablecoin market into dollar assets; conversely, if the market expects the Fed to cut rates in the future, weakening dollar expectations, stablecoins may receive some support due to safe-haven demand and capital seeking new investment opportunities. Additionally, while the regulatory framework for stablecoins is advancing, the uncertainty of Fed policy may also affect the development of stablecoins in terms of compliance and market acceptance.
Indirect Impact on the Cryptocurrency Market
1. Investment Sentiment and Capital Flows: The Fed's decisions and Powell's speech influence the global investor risk appetite and investment sentiment. If the market perceives that the Fed's monetary policy is unfavorable for economic growth, investors will be more cautious, reducing investments in high-risk assets, with cryptocurrencies being the most affected. Conversely, if the market anticipates that Fed policies can promote economic growth, investor risk appetite may rise, potentially leading to some capital flowing into the cryptocurrency market. For example, when Powell emphasizes a cautious evaluation of economic data and inflation pressures, concerns about the economic outlook increase, leading capital to flow out of high-risk areas, including cryptocurrencies, into relatively safe assets like bonds; if the market expects that the Fed will adopt easing policies to stimulate the economy, some capital may flow from traditional low-yield assets into cryptocurrencies in search of higher returns.
2. Industry Development Expectations: The Federal Reserve's policy affects the macroeconomic environment, which is crucial for the long-term development of the cryptocurrency industry. If the economic environment is unstable or the risk of recession increases, the cryptocurrency sector, as an emerging industry, may encounter obstacles, with increased difficulty in corporate financing and decreased user engagement; conversely, if the economic environment improves, the cryptocurrency sector will encounter more development opportunities, attracting more funds and talent, promoting technological innovation and application expansion. For instance, during unstable economic periods, cryptocurrency startups face increased difficulty in obtaining venture capital, whereas during prosperous economic times, venture capital firms are more willing to invest in cryptocurrency-related projects.
