Cryptocurrency markets skyrocketed into new territory Friday after Federal Reserve Chair Jerome Powell signaled that interest rate reductions could be imminent, pushing the Dow to its first 800-point plus gain this year. That ended the Dow’s longest streak without a new high since Dec. 4, 2024, according to Dow Jones Market Data, and signaled a major surge of optimism at the prospect of some economic policy relief.
Cryptos were major stars of that rally.
Ethereum (ETH) climbed over 15% to reach a new all-time high of $4,885, surpassing its previous record from November 2021, while Solana (SOL) swung between 8% and 12.5% in a 24-hour period, nudging just past the longtime “psychological” mark of $200 for a high of $201.94. Bitcoin (BTC) lovers also had their moment when it climbed 2.5% to $114,700 from $112,000, clawing back some of its losses from earlier this week.
As cryptocurrencies and stocks soared, the probability of a September Fed rate cut jumped to 90% following the speech, Reuters reports.
So why all the enthusiasm?
Simply put: When the market feels more secure, it invests in places considered riskier bets. Cryptocurrencies and other fintechs that are part of emerging technology sit squarely in those crosshairs.
This time it appears institutional investors led the charge, as they look for investments that can balance out a shaky U.S. dollar, general volatility, and risk.
“It’s almost a relief rally,” Carol Schleif, chief market strategist at BMO Private Wealth, told the Wall Street Journal. “Markets had anticipated more angst.”
The optimism from the market is a sign monetary easing is a reversal of that angst, and could be a change in fortune for the sector, which has whipsawed in recent trading, said Steve Lee, co-founder and managing partner at Neoclassic Capital and investor in BlockTower Capital.
“I see this as constructive in the short term, and it may help reverse this week’s sell-off. The key question is whether this momentum holds beyond the low-liquidity weekend. Since BTC and ETH price action is increasingly institutionally driven, spot ETF flows today and Monday will be a strong indicator of whether we are set for another leg higher,” Lee told CoinDesk.
What did Powell say?
As usual, Powell got straight to the point during his Wyoming speech on Friday.
“Downside risks to employment are rising,” Powell said at the Jackson Hole Symposium. “And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.”
Powell also said recent policy moves from the Trump administration could affect inflation.
“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he said, adding that tariffs could push inflation higher, at least temporarily. “A reasonable base case is that the effects will be relatively short lived, a one-time shift in the price level.”
You can read Powell’s entire speech here.
So how high did we go?
In this rally’s case, a rising tide did indeed lift all boats.
The broader S&P 500 also saw strong gains, rising 1.5%, its best performance since May, and equities were a bright spot on the NASDAQ Composite, which advanced 1.9%.
But perhaps most importantly, the index used by Wall Street to gauge how frightened investors might be, the CBOE Volatility Index (VIX), dipped more than 14% to its lowest level this year. The VIX is a favorite of trading pros and shows how turbulent the market feels.
Those gains across the board are an encouraging sign for both the buyside and the sellside, experts said.
“Correlations between cryptos and equities are high, and we see a market mood that will be highly sensitive to this week’s comments from the Jackson Hole meeting of monetary authorities, as well as from any reactions from fiscal authorities,” wrote Manuel Villegas, an analyst at Julius Baer, in a research note.
Which crypto continue to rise?
While nothing is a given once the opening bell rings, some analysts are already predicting which companies they think will continue to do well.
Analysts at Monarq Asset Management told CoinDesk that there’s still more room for Ethereum to grow, and that they expect to see the coin top $5,000 in near-term trade.
“We maintain our overall bullish stance. Market internals remain constructive, with few signs of overheating and, as you point out, a clear path to new all-time highs in both BTC and ETH,” Sam Gaer, chief investment officer of Monarq Asset Management’s Directional Fund, told CoinDesk.
“Our house view is that Powell’s dovish pivot has cleared the way for $5,000+ in the near term, also not the hardest call to make,” Gaer said. “Demand from treasury vehicles should increase into the fall as many of the deals announced this summer close or de-SPAC, in addition to ongoing institutional and retail inflows.”
Will Powell lower rates?
Friday’s rally was a perfect example of how sensitive global markets are to Fed policy, particularly after a long period of no rate cuts. Analysts, traders, and every other player in finance have been attempting to read Powell’s tea leaves for years with only moderate success, and even a major rally like Friday’s can’t completely fortify a very fragile market.
While no one can be entirely certain what Powell and the Fed will do next week, market watchers across the board are bullish on the move. “The Fed isn’t going to be the party-pooper,” Brian Jacobsen, chief economist at Annex Wealth Management, told the WSJ.
How much that rate cut might matter in the long run remains to be seen.
“We’re still doubtful that a September cut points to a prolonged interest rate cutting cycle. Risks to inflation are real and coming from many angles,” Lauren Goodwin, economist and chief market strategist at New York Life Investments, wrote in a Friday note.
