Crypto Price Movers: Bitcoin, Ethereum, XRP rally as Fed Chair Powell turns dovish

Bitcoin (BTC) and the crypto market rebounded on Friday following Federal Reserve (Fed) Chair Jerome Powell's speech at the Jackson Hole Economic Symposium, hinting at a possible rate cut due to the weakening labor market.

Bitcoin, crypto market rebound as Powell hints at possible shift in Fed policy stance

The crypto market saw a recovery on Friday, driven by Jerome Powell's dovish address at the Jackson Hole Economic Symposium, overturning hawkish market expectations.

Powell hinted that the central bank could begin lowering rates if the labor market poses an economic risk.

"Preemptive action likely would be warranted should a tight labor market pose a risk to price stability," Powell said on Friday at the conference.

He added that the Fed will adopt a more flexible inflation targeting framework, shifting from its earlier inflation "makeup" strategy.

Powell also stated that the steady unemployment rate allows policymakers to carefully deliberate on any potential changes to their current stance.

"Shifting balance of risks may warrant adjusting policy stance," said Powell.

The speech comes after the Federal Open Market Committee's (FOMC) July meeting minutes, released on Wednesday, came with a hawkish undertone. The minutes showed that a majority of policymakers leaned toward holding rates steady in July due to inflation concerns. 

However, Powell's dovish hint on Friday has since revived expectations of a 25 basis-point cut in the Committee's September meeting. Odds for a cut rose close to the 90% mark from about 73% on Thursday, while expectations of a no rate cut dropped to 10% from 28%, per the CME FedWatch tool. 

Bitcoin reacted quickly to the development, pushing above $116,000 at publication time, after seeing a 3.4% rise. The altcoin market also jumped following Powell's speech, with Ethereum (ETH), XRP and Solana (SOL) gaining 12%, 5% and 8%, respectively.

“This is bullish for the front end of the yield curve and risk assets, where Bitcoin is a fast horse in the race. A dovish tilt [...] supercharge[s] BTC’s narrative as a hedge against fiat uncertainty, accelerating institutional accumulation and liquidity,” Jessy Gilger, Investment Advisor at Unchained, told FXStreet. “While the mid and long end of the curve remain uncertain, Bitcoin’s sensitivity to macro signals means it’s poised to ride any wave of optimism from rate cut expectations.”

The recent rise has seen the general crypto market capitalization register more than a 5% gain in the past 24 hours, pushing its value above the $4 trillion threshold.