Powell’s Dovish Pivot Sparks ETH Rally, BTC ETF Outflows
At Jackson Hole, Fed Chair Jerome Powell surprised markets with a dovish speech, highlighting downside employment risks and deeming tariff-driven inflation as likely transitory. While retaining a 2% inflation target and restrictive policy stance, Powell signaled openness to future easing. Equities surged, Treasuries bull-steepened and the dollar weakened in the ensuing crypto rally. Bitcoin saw modest declines amid six consecutive days of ETF outflows, while Ethereum outperformed sharply, driven by rising demand for ETH digital asset trusts (DATs) and record-high short positions in CME futures. Diverging volatility—Bitcoin’s implied vol hit new lows as ETH IV climbed—reflects shifting trader sentiment. Option markets price only a 15% chance of BTC reclaiming its all-time high within a month. Looking ahead, Nvidia earnings and US PCE data may add further volatility. Crypto traders should monitor ETF flows, volatility divergence and ETH futures positioning as key indicators for the next phase of the market rally.
Bullish
Powell’s unexpectedly dovish stance at Jackson Hole reinvigorated risk appetite, a dynamic that historically correlates with crypto rally phases. The surge in Ethereum driven by DAT inflows and record short positioning suggests a short squeeze potential, while subdued Bitcoin volatility and ETF outflows may set the stage for a rebound once market sentiment shifts. Short term, traders can capitalize on momentum in Ethereum and watch BTC volatility for entry points. Long term, continued Fed accommodation supports a bullish backdrop for cryptocurrencies, provided inflation remains stable and macro risks stay contained.