The Federal Reserve’s recent remarks by Chair Jerome Powell revived optimism in crypto markets, suggesting a rise in the chances of interest rate reductions. In a speech concerning the central bank’s balance sheet, Powell recognized the increasing “downside risks to unemployment,” indicating a tendency to relax monetary policies.

“Rising downside risks to employment have shifted our assessment of the balance of risks.”

Jerome Powell

In his speech, he highlighted that the Fed is looking toward a more neutral stance after its September meeting. Meanwhile, the markets are keenly watching the upcoming Federal meeting on October 29, where the expectations for a 0.25% cut in rates stand at 95.7%, as per the CME futures data.

Michael Feroli, JPMorgan’s Chief Economist stated, “While there was little doubt the FOMC was angled to cut rates at its next meeting, today’s remarks were strong confirmation of that expectation.”

Despite the market’s current nervousness, it seems the potential end of quantitative tightening (QT) could signal a favorable turn for cryptocurrencies as the Fed is expected to halt balance sheet runoff.

Arthur Hayes commented, “There you have it, QT is over. Back up the truck and buy everything.”

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As the market prepares for these changes, reactions remain guarded, particularly following a significant liquidation event affecting total market capitalization, which dropped below $4 trillion.

Regarding Bitcoin’s performance, the cryptocurrency has seen a 750% increase over the past three years, despite the Fed’s tightening measures. Joe Consorti remarked, “BTC has been effectively rangebound since May. You know what happens next. Don’t overthink it.”

As things stand, crypto enthusiasts and traders will be watching closely as the Federal Reserve’s policy directions will undoubtedly shape the outlook for the coming months.