Those who believe in crypto want a system wherein a central authority cannot interfere with one’s financial decisions and transactions. When Bitcoin was created in 2009, it was anti-thesis to a monetary system that reared its ugly head in the 2008 economic turmoil. However, this dream of decoupling with the traditional market hasn’t been realized. Whether believers in crypto like it or not, the industry still moves as a reaction to the general market condition. The Jackson Hole Summit is one such event that affects the traditional and digital asset industries alike.
History of Jackson Hole
The Federal Reserve holds an annual three-day summit. It is traditionally hosted by the Federal Reserve Bank of Kansas in Jackson Hole, Wyoming. The area is a valley between Gros Ventre Mountain and Teton Mountain Ranges. Early trappers or mountain men used the term “hole” to describe large mountain valleys. It got its name in 1894 and was made into a municipality in 1914.
The Jackson Hole Economic Symposium is described as the most exclusive economic get-together by the New York Times. It is regularly attended by important economic figures, which include top economists and governors of foreign central banks.
The first summit was held in 1978, but it was only in 1982 that Jackson Hole became the regular venue for the event.
Why should the Crypto Space Care About the Jackson Hole Summit?
Whatever is discussed in the summit will affect the monetary supply in the US and this will also ripple to the global economy. We would like to think that crypto is supposed to be independent of any central bank policy, but that is easier said than done. We have to understand that crypto investors are here to make money. The strategy is simple, buy low and sell high.
To make it simple, try to remember the points below.
- Central banks determine interest rates. Interest rate hikes are one of the tools to cool down inflation. When the inflation is high, it is expected that interest rates will also increase.
- High interest will make borrowing money expensive. This will lessen the money circulating in the economy. This also means less money to be invested in assets like stocks and crypto.
- Less money for crypto, means less demand which could equate to stagnant or lower prices.
This is the reason why rate hikes are usually followed by market dumps.
What Did the Fed Chair Say and How Does It Affect Crypto?
The Fed Chair’s speech is probably the most anticipated event in the Jackson Hole Summit. He said that the inflation rate has been lowered due to the Fed’s effort. However, it is still far from the two percent goal. He added that the Fed is prepared to raise rate further.
It is the fed’s job to bring inflation down to our 2% goal. And we will do so. We have tightened policy significantly over the past year. Although inflation has moved down from its peak, a welcome development, it remains too high. We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.
Jerome Powell, 2023, Jackson Hole Summit
Powell’s comment is not a good sign. Another rate hike will potentially lessen the money flowing into crypto. But we also have to remember that money-makers are always on the lookout for good opportunities. A sudden approval of several spot Bitcoin ETF applications can counter rate hikes. Lower prices might be opportunities to accumulate quality crypto projects.
Watch Powell’s Speech:
Source: Kansas City Fed
Image source: Pixabay
