Cryptocurrencies, stocks bounce as Powell calms traders

Bitcoin and ether pared losses Thursday, rebounding alongside stocks as the Federal Reserve tried to calm traders with assurances that rate cuts are still coming sometime this year.

Bitcoin (BTC) retook $68,000 Thursday, rallying close to 4% in 24-hours after a disappointing start to the second quarter of 2024. Ether (ETH) similarly was on the comeback Thursday, gaining more than 2% to trade just under $3,400 at time of publication, according to Coinbase.

The S&P 500 and Nasdaq Composite indexes also turned things around Thursday, gaining 0.7% and 1.1%, respectively, as traders digested Federal Reserve Chairman Jerome Powells comments on Wednesday.

The head of the central bank confirmed this week that lower rates are still expected to come at “some point” before the end of 2024. Still, Powell said, the road to lower inflation has been “bumpy,” and with better-than-expected data — like Tuesday‘s March ISM Manufacturing PMI, which topped 50 for the first time in a year and a half — the Fed’s path forward is still uncertain.

The US Federal Reserve, as Chair Powell is fond of reminding us, is now “‘data dependent,’ which presumably means its decisions will depend on the economic data the organization receives,” Noelle Acheson, author of the Crypto is Macro Now newsletter said. “The main advantages of a central bank declaring it is ‘data dependent’ are 1) the public-facing reassurance that reality matters more than theory, and 2) the flexibility to adapt to events.”

Of course, Acheson added, the downside to data-dependence is that the numbers are backward-looking, meaning action is delayed. There is also some disagreement about which metrics really matter.

The Bureau of Labor Statistics is slated to release the March employment report Friday. Analysts are expecting unemployment to remain unchanged at 3.9% — far below the historical average around 5.7%. If the economy looks like its accelerating too quickly, central bankers will opt for the “no landing,” i.e. going back to hiking rates, analysts said.