Bitcoin trades over $17,000 following Powell's speech, December decisions loom large

Quick Take

  • Jerome Powell spoke from Washington today with the Fed’s next self-imposed blackout period starting on Dec. 3.
  • Markets whipsawed as Chair Powell spoke, with bitcoin trading above $17,000 shortly after.
  • Traders will be watching more than interest rates in December, with inflation data and House hearings ahead. 

The Fed is likely to slow its rate increases in December, while upcoming inflation data and the first U.S. House committee hearing on the FTX collapse also loom large for markets. 

"It will take substantially more evidence to show that inflation is declining, as such inflation is still far too high," Chair Powell said during his speech at the Brookings Institution today. The Fed will "stay the course until the job is done," he said.

Chair Powell's rhetoric showed signs of softening, as he appears to have changed tack slightly from Nov. 2, when he said the path to a soft landing "has narrowed over the course of the last year."

Bitcoin whipsawed as Powell spoke. Before the speech at 1:00 p.m. EST, bitcoin was changing hands at $16,777, and ether was trading at $1,265 — both had dropped over 0.8% prior. Following the speech, prices moved higher.

Bitcoin was changing hands at $17,070 at 2:30 p.m. EST, up 1.7% in the hour since Powell's speech. 

Last week the Fed released the minutes from its Nov. 1 and 2 meetings. The minutes showed a consensus to slow the pace of increases in the target range for the federal funds rate. "In addition, a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate," it read

December decisions and data drops

Before Powell's speech, the CME's FedWatch tool was pricing in a 65% chance of a 50 basis point increase at the Dec. 14 meeting. The tool measures the likelihood of the Fed's next interest rate change, as implied by 30-day fed funds futures pricing data.

Following the meeting, this rose to 77%, showing traders are now more convinced of a 50 basis point increase after the speech, instead of the more aggressive 75 basis point hikes the Fed engaged in earlier this year. The probability had narrowed week-on-week, from 75% on Nov. 23 to 66% on Nov. 29.

Beyond the interest rate decision, December also brings new inflation data. U.S. inflation data for November will drop on Dec. 13.

In its latest market update, crypto trading firm QCP Digital said this poses an upcoming risk to crypto markets. The firm added that the first U.S. House Financial Services Committee hearing on FTX is also a potential risk. 

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