The cryptocurrency market has taken a breather this week, and not the relaxing kind. Digital assets like Bitcoin and Ether are losing steam as investors sit on their hands ahead of Federal Reserve Chair Jerome Powell’s highly anticipated speech at the Jackson Hole Symposium this Friday.
With market volatility turning up the heat, traders have gone into risk-off mode, pulling a net $1.9 billion from spot Bitcoin and Ether ETFs over the past four sessions. If that sounds like a case of the jitters, you’re not wrong, this week is all about nerves, numbers, and what Powell might have up his sleeve.
Options market turns defensive
If you peek into the options market, things are looking rather defensive. The put-to-call ratio for Bitcoin contracts expiring on August 22 has jumped to 1.33, showing more puts (bearish bets) than calls (bullish bets). This ratio often rises when traders fear downside risks. Currently, there’s $3.8 billion worth of Bitcoin options on Deribit, with a large chunk betting on a drop toward $110,000.
These defensive plays signal traders are hedging their bets before Powell steps up to the podium. As Peter Chung, head of research at Presto, put it, “The market is more sensitive to the risk of Powell sounding hawkish than dovish.” That’s analyst-speak for “we’re nervous he might not say what we want to hear.”
Bitcoin and Ether under pressure
The market’s reaction so far? A consistent drop in major crypto prices. Bitcoin has fallen over 9% from its all-time high of $124,514 earlier this month, currently trading around $112,567 (at the time of writing). Ether has dropped more than 5%, slipping below the $4,200 support level, with a downside risk toward $3,900.
Tuesday and Wednesday saw further declines, with Bitcoin briefly dipping to $112,565, its lowest level in two weeks. The dip reflects a cocktail of profit-taking, leveraged liquidations, and, of course, market anxiety ahead of Powell’s speech.
Wondering what the FOMC is?
Let’s hit pause for a second. Don’t know what is this “FOMC” everyone keeps talking about?” Been there.
The FOMC means Federal Open Market Committee. It’s the branch of the Federal Reserve that decides on interest rates and other key monetary policies. Think of it as the financial steering wheel of the US economy. Markets typically celebrate interest rate cuts. But when rates are raised, or even suggested to rise, they often react negatively. And cryptocurrencies, being riskier assets, feel the impact strongly.
FOMC happens every year eight times, once every six weeks. These scheduled meetings are where the real action happens, interest rate decisions, economic outlooks, and policy statements that can send shockwaves through financial markets, especially in crypto. So if it feels like every other month people are sweating over what the Fed will say, it’s because they are.
A little update: Yesterday’s FOMC minutes revealed that most Federal Reserve officials remain more concerned about inflation risks than the labor market, reinforcing a cautious stance on rate cuts heading into September.
Why does Powell’s Jackson Hole speech matter?
Every year, central bankers and economists gather in Jackson Hole, Wyoming, for an economic symposium that, believe it or not, often rocks the markets. Powell’s Friday speech is expected to set the tone ahead of the September FOMC meeting. Traders are especially focused on whether Powell will hint at rate cuts, stay the course, or double down on fighting inflation.
Currently, expectations for a rate cut in September have dipped to 82%, down from over 94% just a week ago. Blame that on the latest CPI report showing a 2.7% rise in consumer prices, unchanged from June and still above the Fed’s 2% target.
Tony Sycamore from IG Australia noted that recent Fed meeting minutes revealed members still see inflation as a bigger threat than employment risks. That suggests the Fed is in no rush to ease.
So yes, Powell’s speech could either shake up the crypto scene or shatter it completely. If Powell sounds hawkish, brace for more downside. If he plays it cool, we might see a relief rally. Either way, it’s not exactly water under the bridge, Friday’s speech might make or break short term market momentum.
What are traders doing now?
In the meantime, crypto investors are choosing caution over action. Profit taking is the name of the game, especially after Bitcoin hit a record high earlier this month. Many traders are now in wait-and-see mode, holding off until Powell provides clearer guidance.
Spot ETFs for Bitcoin and Ether have also seen net outflows, a sign that institutional investors are just as wary. The broader sentiment is clear, no one wants to be caught on the wrong side of a potential policy shift.
Crypto stocks feeling the heat but institutions keep buying despite the dip
The ripple effect from Powell’s expected remarks isn’t just hitting coins, it’s also hitting crypto-related stocks. Companies like Marathon Digital (MARA), Coinbase (COIN), and MicroStrategy (MSTR) saw share prices drop by 5–7% this week.
That’s mainly because cryptocurrencies are highly sensitive to shifts in liquidity. When interest rates go up, borrowing becomes more expensive, which typically dries up the risk appetite that fuels crypto booms. André Dragosch of Bitwise Research even called interest rate cuts the “most important macro trigger” for a renewed crypto rally through the end of 2025.
Interestingly, institutional players are still buying the dip. As of August, at least 297 public entities hold Bitcoin, a sharp increase from just 124 in June. Collectively, they control over 3.67 million BTC, or more than 17% of the total supply.
This divergence between institutional accumulation and retail caution tells us something important: Long-term confidence in Bitcoin’s future remains intact, even if short-term sentiment is shaky.
Government adoption and regulatory signals
While markets wobble, governments are quietly moving toward adoption. Fifteen US states have started establishing Bitcoin reserves following an executive order by President Trump exploring a national crypto stockpile. While the executive order may be more symbolic than actionable for now, it reflects growing institutional and political support for digital assets.
Regulatory clarity, which has long been a headwind for crypto, could turn into a tailwind in 2025. That change may open the door for further integration of digital assets into traditional finance systems.
Bottom line
One last thing: Bitcoin is no longer operating in isolation. Its growing correlation with traditional equities, driven by rising institutional involvement, means it now reacts more like a mainstream asset. When the Fed sneezes, crypto often catches a cold. So, when Powell so much as clears his throat at Jackson Hole, Bitcoin could either scale new heights or take a sharp fall.
For now, all attention shifts to Friday’s speech at Jackson Hole. If Powell signals rate cuts, the crypto market could bounce back like a rubber band. If not, brace for continued volatility through September’s FOMC meeting.
With macro uncertainty clouding the view, traders are navigating carefully. But one thing’s clear, the next few weeks will shape the narrative for the rest of the year.
Disclaimer: Boztech crypto blog is for information only and isn’t meant to be taken as financial or investment advice. The crypto market moves fast, prices can swing wildly in no time. Always do your own research (DYOR) before putting your money on the line.
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