Tonight, the global financial market holds its breath, waiting for a single voice — Federal Reserve Chairman Powell. At 10 AM Eastern Time on August 22 (10 PM Beijing time tonight), Powell will give a speech at the Jackson Hole Global Central Bank Annual Meeting.
Although he may not directly mention cryptocurrencies, seasoned investors know well that when Powell speaks, the entire market tends to 'shake.' The following key factors will profoundly impact the cryptocurrency market tonight and in the foreseeable future.
Powell's speech: the 'judge' that determines the market's short-term direction.
Powell's remarks are always the 'weather vane' of the financial market. If he leans towards a 'hawkish' position in his speech, implying a tightening of monetary policy or even a potential interest rate hike, the market is likely to enter a downward trend in the short term.
In such expectations, funds will flow to more conservative and safer asset classes due to risk aversion, inevitably leading to outflows from the cryptocurrency market and downward pressure on prices.
Conversely, if Powell demonstrates a 'dovish' stance and signals a loose monetary policy, risk assets like Bitcoin may see a price increase.
A loose monetary policy means increased market liquidity, with more disposable funds in investors' hands. In seeking asset appreciation, cryptocurrencies, which have high risk and high return characteristics, will naturally enter their field of vision, leading to increased demand and rising prices.
Given the current market's general expectation of a Fed rate cut in September, each of Powell’s remarks regarding the rate cut path, pace, and economic outlook could trigger significant market volatility. Investors are advised to closely monitor the market tonight and prepare for responses in advance.
Hang Seng Index adjustment: the 'guiding stick' for medium to long-term capital allocation.
Last week, the news of the Hang Seng Index adjustment was announced, and this adjustment will affect capital allocation in the medium to long term.
If more quality companies are included after the adjustment, market confidence in Hong Kong stocks will be boosted, and investment enthusiasm will rise.
Hong Kong stocks are closely connected to global financial markets; positive market sentiment will radiate outwards and can be considered an indirect benefit for the cryptocurrency market.
Increased liquidity of funds and enhanced overall market activity may lead to some funds being diverted to the cryptocurrency market, bringing new vitality to the crypto market.
Economic data from various countries: a 'navigator' for global capital flows.
Data from major economies such as the UK, Japan, and Germany are also crucial, as they will influence global capital flows.
For example, if European economic data performs well and the economic situation improves, the euro will strengthen. In the foreign exchange market, a strong euro will make the dollar relatively weaker.
As cryptocurrencies like Bitcoin are often priced in dollars, a weaker dollar will provide upward momentum for Bitcoin prices, creating short-term benefits for the cryptocurrency market.
On the contrary, if economic data from these countries is poor and market risk aversion rises, funds will flow out of the high-risk cryptocurrency market, causing prices to drop.
Canadian retail data and U.S. oil drilling numbers: a 'barometer' of inflation expectations.
Canadian retail data reflects the vitality of the country's consumer market, while U.S. oil drilling numbers are closely related to crude oil supply; both will influence inflation expectations and consequently affect the Federal Reserve's policy direction.
If oil prices continue to rise, energy costs will increase, which will be transmitted across various industries, leading to widespread price hikes and significantly heightened inflationary pressure.
In this case, the Federal Reserve may lean towards a 'hawkish' policy to control inflation, maintaining or even raising interest rates.
This is undoubtedly bad news for the cryptocurrency market; in a high interest rate environment, funds are more inclined to flow into traditional financial markets, leading to a withdrawal of funds from the cryptocurrency market and downward price risks.
Personal view: seize long-term opportunities amid short-term fluctuations.
In my view, the cryptocurrency market will inevitably experience fluctuations in the short term due to the aforementioned factors, but long-term investors need not be overly anxious. Changes in news are more about impacting market sentiment, while the actual value of cryptocurrencies is determined by the project's technical strength, application scenarios, and innovative capabilities.
If Powell's speech leans dovish, the market is likely to welcome a rebound, which is a good opportunity for short-term investors to capture profits. However, it is important to enter and exit quickly, setting appropriate stop-loss and take-profit levels to avoid greed leading to profit losses.
If Powell takes a hawkish stance, it could present a good opportunity for long-term investors during market corrections. Some quality projects may be unjustly priced during market panic, allowing investors to enter at reasonable prices and potentially reap substantial returns once market sentiment calms and trends reverse.
Remember the classic rule in investing: 'buy the expectation, sell the fact.' Before major events occur, the market often digests related information in advance, and prices react accordingly, so do not blindly chase highs or panic sell, allowing market sentiment to lead you.
Opportunities and risks coexist, which is an eternal theme in the cryptocurrency market. Investors must manage their positions carefully and avoid putting all their eggs in one basket, maintaining calm and rationality at all times. Seasoned players who have weathered market storms understand that in this uncertain market, keeping a steady mindset is key to ultimately winning.
