Powell is about to give a speech at the Jackson Hole Global Central Bank Annual Meeting, which has stirred quite a wave in the financial circle, and the crypto world is also getting anxious because his speech has a significant impact on the crypto market. Based on current market expectations, there are roughly three scenarios for this speech.
Scenario 1: Dovish Turn
Powell clearly acknowledges that the risks of economic downturn have increased, hinting that sufficient progress has been made in combating inflation, thus opening the door for a rate cut in September. If this happens, the crypto market will surely celebrate. Mainstream coins like Bitcoin and Ethereum will likely rise first, with Bitcoin possibly breaking through key resistance levels. A large influx of funds will come in, and altcoins will also surge crazily, with various popular concept coins potentially doubling in a single day. The demand for stablecoins will decrease as everyone wants to exchange their stablecoins for more promising digital currencies.
Scenario 2: Hawkish Stance
Powell downplays the weak economic data, emphasizing that inflation is still too high, and does not provide any hints of easing. This would be a heavy blow for the crypto market. The prices of Bitcoin and Ethereum could drop by 10% in a short time, and the contract market would be in disarray, with a large number of highly leveraged long positions being liquidated, triggering a chain reaction. Altcoins would experience even more exaggerated declines as funds flee madly, turning to Bitcoin or stablecoins for safety. Some small coins with no actual value might even go to zero, while the demand for stablecoins skyrockets, becoming everyone’s "Noah's Ark."
Scenario 3: Neutral and Ambiguous
Powell acknowledges risks on both inflation and economic cooling fronts, reiterating that policy depends on data, neither closing the door on a rate cut in September nor making any commitments. In this case, the crypto market may initially maintain a volatile state, with a strong wait-and-see sentiment as the market waits for subsequent economic data and policies to become clearer. However, if the market had previously overly priced in rate cut expectations, this neutral stance might trigger some degree of correction.
For us crypto players, Powell's speech is a significant test. Before the speech, it’s best to manage positions well and avoid high leverage. A "dumbbell configuration" strategy can be employed, with part of the allocation in mainstream coins like Bitcoin and Ethereum, and part kept in stablecoins as ammunition. Set up response plans in advance and adjust strategies promptly based on Powell's speech and market reactions; respecting the market is key to going further in the crypto space.
