Crypto remains at risk ahead of Powell’s speech

Cryptocurrencies and other assets have lost some of their gains in the last few days as uncertainty grew among investors due to the conflicting developments that emerged late last week. Traders have reacted to the interest rate hikes and the impressive US job market figures as well as stronger than expected data on US services sector activity.

Today, risky assets in general have stabilized to a certain extent as traders await a speech from the Federal Reserve’s president later in the day. Investors expect to glean some feedback regarding the latest economic data and more clarity over the potential next steps in monetary policy as well as their impact on financial markets.

Markets could record significant volatility during and after Jerome Powell’s speech as traders adjust their views. A more dovish approach from the president could push the markets higher while talk about a harsher monetary policy could lead to a selloff.

Bitcoin was able to recover strongly since the beginning of the year as sentiment among investors improved globally, inflation retreated and fears of an economic slowdown subdued. However, the crypto market remains well below its historical highs and could strongly benefit from a looser monetary policy.

Over the longer term, interest rates could stabilize this year and could start declining towards the end of the year if the Federal Reserve’s inflation targets are met in the meantime. As a result, while a tighter monetary policy could negatively affect digital assets over the short term, it could pave the way for a more significant recovery within the year.