Crypto investors are holding their breath before Jerome Powell, chair of the Federal Reserve, speaks Friday in Jackson Hole, Wyo. Bitcoin has dipped about 1% over the past 24 hours and almost 5% over the past week to around $112,000, according to data from Binance. Ethereum, the world’s second largest cryptocurrency, is also down 2% over the past day to now $4,240, per Binance.
The pullback of the two largest cryptocurrencies tracks with a broader market decline, with the total market capitalization of all cryptocurrencies down 1% day over day to $3.9 trillion. Meanwhile, the S&P 500 is down 0.3% since markets opened Thursday.
“Investors appear increasingly doubtful that Powell will signal a pivot at Jackson Hole,” James Butterfill, head of research at crypto asset manager CoinShares, told Fortune.
The weeklong pullback in the digital assets market comes as traders try to predict whether the Fed will cut interest rates in September, which will likely prompt money to flow from U.S. Treasury bills into riskier assets with higher potential yields, like crypto.
Since 1982, the Federal Reserve Bank of Kansas City has hosted a conference in Jackson Hole. The Fed chair usually speaks at the event, and, as with any public speech from Powell, investors will pore through his remarks to glean whether the Federal Reserve will cut rates.
Last week, analysts were nearly certain that rate cuts were imminent after the Bureau of Labor Statistics reported only a moderate increase of total inflation in July of 2.7%. That was less than what many expected. Markets surged, and Bitcoin notched another all-time high.
But two days later, the BLS reported that prices for goods made by U.S. producers increased 0.9% in July, the biggest uptick in what’s called the producer price index since June 2022. The news led to a dip in crypto markets, which have traded lower over the past week.
Still, some market observers are optimistic. “This dip looks like a small correction to me, not a trend break,” said Ira Auerbach, head of the venture arm connected to blockchain developer Offchain Labs and the former head of digital assets at Nasdaq Inc.
He said that pro-crypto policy in the U.S., like President Donald Trump’s recent executive order that allows crypto and other private assets into 401(k)s, has stayed intact. Auerbach also pointed to increased adoption of stablecoins, or cryptocurrencies tied to underlying assets like the U.S. dollar.
“I’d expect this pullback to get absorbed,” he added, “and for the trend higher to continue once the macro fog clears.”
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