Powell’s Hawkish Stance Sends Rate Cut Expectations Plunging - What It Means for Your Crypto Portfolio

Federal Reserve Chair Jerome Powell just threw cold water on market hopes for imminent rate cuts, sending traditional finance into a tailspin while crypto markets watch with keen interest.

The Hawkish Hammer Drops

Powell's latest commentary shattered the soft landing narrative that had traders betting on multiple rate reductions. Instead, the Fed chief doubled down on inflation vigilance, signaling that borrowing costs will remain elevated for longer than anticipated.

Crypto's Decoupling Opportunity

While traditional markets reel from the reality check, digital assets stand at a fascinating crossroads. Higher rates typically pressure risk assets, but crypto's fundamental value proposition - decentralization and monetary sovereignty - becomes increasingly attractive when central banks maintain their iron grip.

The Institutional Calculus

Money managers who'd positioned for Fed pivot now face the classic 'hold or fold' dilemma. Some will retreat to cash, while others might accelerate their crypto allocations seeking uncorrelated returns - because nothing says diversification like assets that operate outside the traditional financial system entirely.

Another day, another reminder that central bankers would rather crush growth than admit their money printer caused this mess. Meanwhile, Bitcoin's code doesn't care about Powell's press conferences.

Elevate Your Investing Strategy:

• Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.

Following Powell’s comments, the odds of a 25 bps rate cut in December plunged to as low as 66.56% compared to a high of 98.78% on October 20. The odds have since slightly recovered, sitting at 70.8%.

December Rate Cut Hangs in the Balance

DoubleLine Capital founder Jeffrey Gundlach believes that a lack of federal economic data due to the government shutdown places the odds of another rate cut by year-end at 50-50. The shutdown is currently in its 29th day, inching closer to the record of 35 days set in 2018-2019.

“It sounds to me like if we don’t have any more data, I think that we need to price out, to a certain extent, what was an assumption by the market that there was going to be—almost with a 90%-plus certainty—a cut in December,” Gundlach told CNBC.