Crypto Markets Ready To Rally on Powell’s Dovish Tone, But China–US Deal Talks Cloud Outlook

Core Insights - Federal Reserve Chairman Jerome Powell indicated that further rate cuts are likely, which could serve as a catalyst for recovery in the crypto market [2][3][4] - The crypto market is still recovering from a significant liquidation event, with Bitcoin and Ethereum prices remaining over 10% below recent highs [1][6] Group 1: Federal Reserve's Monetary Policy - Powell confirmed that the Fed is preparing to ease monetary policy at the upcoming meeting on October 28-29, despite persistent inflation concerns [3][4] - The focus has shifted to the risks in the labor market, which Powell described as showing significant downside risks [4][5] - Historically, rate cuts have provided strong support for crypto rallies by increasing liquidity in risk assets [4][5] Group 2: Impact on Crypto Market - The potential shift from tightening to easing by the Fed could drive investors towards higher-yielding assets like Bitcoin and Ethereum [5][6] - Analysts have noted that easing cycles typically coincide with increased minting of stablecoins and higher inflows into crypto exchanges, signaling a potential rally [5][6] - Despite a favorable macro backdrop, the crypto market remains subdued, attributed to uncertainties surrounding U.S.-China relations [6][8] Group 3: U.S.-China Relations - The ongoing trade standoff between the U.S. and China is seen as a wildcard affecting market sentiment, contributing to recent sell-offs [8][9] - The outcome of resumed negotiations between the two countries could significantly impact market dynamics, as past agreements have led to surges in both equity and crypto markets [9]