Bitcoin and Ethereum Plunge After Hitting Record Highs... Will Powell Signal a Rebound?

Bitcoin and Ethereum Plummet After Setting Record Highs

Investor Sentiment Cools Due to Macroeconomic Uncertainty

Will Powell Mention a Rate Cut at Jackson Hole?

The virtual asset (cryptocurrency) market has entered a correction phase as prices turned downward across the board. Bitcoin (BTC) and Ethereum (ETH) both recently hit new all-time highs, but quickly plunged due to a combination of short-term profit-taking and adverse effects, such as macroeconomic uncertainties stemming from the United States.

Bitcoin set its all-time high at $124,474 on the global cryptocurrency exchange Binance on the 14th, then turned downward. Over the past six days, it has corrected by about 8%, dropping to $114,690. Ethereum, too, hit a record high of $4,778, but as of the 19th was trading around $4,200, down about 12% from the previous week.

Investors' attention is now on the annual economic policy symposium, the 'Jackson Hole Meeting,' held for three days starting from the 21st (local time). The reason is that market movements could be determined by the remarks of Jerome Powell, Chair of the U.S. Federal Reserve (Fed).

Besant's Comments & PPI Shock... 'Profit Taking and Even Long Liquidations'

Analysts note that two decisive factors have contributed to the current market downturn. First, last week, U.S. Treasury Secretary Scott Besant drew a line by stating, “The strategic Bitcoin holding policy announced by President Donald Trump in March is limited to ‘Bitcoin seized by the federal government’,” thus dampening expectations for direct government purchases of Bitcoin.

Additionally, the U.S. Producer Price Index (PPI) for July exceeded market expectations, shaking forecasts for a Fed rate cut in September. As the market had been rallying rapidly on anticipation of rate cuts, pressure for profit-taking intensified, leading to large-scale position liquidations.

According to data from CoinGlass on the 18th (local time), a total of $530.1 million in futures positions were liquidated across cryptocurrency markets in the previous 24 hours. Of this, $417.17 million consisted of long (buy) position liquidations, far outpacing $85.93 million in short (sell) position liquidations.

By asset, Ethereum saw the largest liquidations. In one day, $196.04 million in Ethereum positions were liquidated—$156.38 million for long positions and $39.66 million for short positions. For Bitcoin, $104.58 million was liquidated in the same period, with $98.49 million in long positions and $6.09 million in short positions.

Signs of capital outflow are also emerging in cryptocurrency ETFs, which had previously seen sustained net inflows. Bitcoin and Ethereum spot ETFs—considered proxies for institutional inflows—recorded net outflows of $135.75 million and $254.39 million, respectively, over the past two trading days.

Jackson Hole in Focus... Will Powell Send a Rate Cut Signal?

All eyes are on the Jackson Hole Meeting. There is speculation that Chair Powell could provide a clue about a rate cut ahead of the September FOMC. If rate cut expectations revive, there is hope that the virtual asset market may rebound.

Jung Min-gyo, analyst at Presto Research, said, “With the recent PPI and July employment data releases, the possibility of a ‘big cut’ has practically disappeared. However, if Chair Powell gives a rate cut clue or dovish message at this Jackson Hole Meeting, the crypto asset market could regain rebound momentum and maintain its upward trend.”

Scott Wren, Global Market Strategist at Wells Fargo, remarked, “If the Fed is considering a rate cut in September, clues will come in Powell’s Jackson Hole speech.” Jason Pride, Head of Investment Strategy at Glenmede, also said, “After Jackson Hole, the market’s focus will shift from 'whether cuts happen' to 'the speed and scale'. While inflationary pressure has eased, employment indicators are showing signs of weakness, making a September cut increasingly likely.”

In fact, the interest rate futures market is factoring in about an 80% probability of a 0.25% rate cut by the Fed in September, with two cuts priced in for the rest of the year.

However, some remain cautious, arguing that it may be difficult for Chair Powell to directly mention a rate cut at this meeting. Joe Kalish, Head of Global Macro Strategy at Ned Davis Research, forecasted, “This Jackson Hole Meeting will likely cause more disappointment than investors expect. Chair Powell seems inclined to stick to his current stance.” Matt Maley, strategist at Miller Tabak, pointed out, “If the Fed pursues an aggressive rate cut, it would only inflate the current bubble further, eventually causing even bigger problems.”

Anna Wong, Chief Economist at Bloomberg Economics, also stated, “There’s a high likelihood that the FOMC will cut rates in September to cushion potential labor market shocks. However, with uncertainty surrounding the upcoming August employment report, it will be difficult for Powell to make many preemptive remarks at Jackson Hole.”