On November 14, 2024, Federal Reserve Chairman Jerome Powell's hawkish remarks caused a significant stir in global marketsAs strong economic data continues to emerge from the United States, Powell's comments underscored the Fed's unwavering commitment to controlling inflation while also profoundly influencing market interest rate expectationsAlthough U.Sstock markets experienced slight declines, the cryptocurrency market—particularly Bitcoin—saw a sharp downturn, losing momentum it had recently built upMeanwhile, the U.Sdollar maintained its robust position, hitting a two-year high, which dramatically heightened expectations for interest rate cuts in DecemberThis collection of economic indicators reveals an ongoing tug-of-war between various internal and external forces within the current financial markets.

In his recent address, Powell made it clear that, despite the strong performance of the U.S

economy, the Federal Reserve is not in a hurry to lower interest ratesHe emphasized that while the current economic health is encouraging, it does not imply that the Fed will swiftly pivot to an accommodative monetary policyParticularly, the Producer Price Index (PPI) in the United States has remained strong, indicating that inflationary pressures still persistThis scenario compels the Federal Reserve to continue maintaining a tightening monetary policy for the foreseeable future.

According to the latest data from the U.SBureau of Labor Statistics, the PPI increased by 2.4% year-over-year in October, surpassing market expectationsThis data suggests that even after consecutive interest rate cuts by the Fed, inflation has not retreated as quickly as anticipatedIn fact, the PPI approaches the 2% target inflation range, signaling that upward pressure on market prices remainsPowell stressed that the Fed would closely monitor economic data to ensure inflation stays within acceptable levels, while also warning that potential future economic fluctuations might introduce new challenges for monetary policy.

Within this context, the direction of Fed policy remains highly uncertain, particularly in light of shifts in the global economy and the domestic labor market

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While current economic growth shows resilience, the threat of high inflation has not entirely dissipatedPowell called for caution, advising against premature loosening of monetary policyThis hawkish stance has intensified market unease regarding future interest rate trajectories, particularly surrounding the ongoing debate about whether interest rates will continue to decline in DecemberConsequently, expectations for further rate cuts have rapidly increased.

Moreover, Powell's remarks not only cemented market anticipation of continued monetary tightening from the Fed but also drove the U.Sdollar index higherThe dollar index surged past the 107 mark, achieving its highest level in nearly two yearsThis robust performance has had profound effects on global markets, directly impacting the attractiveness of non-dollar assets.

Typically, a strengthening dollar coincides with expectations of rising interest rates

The dollar's ascent has made dollar-denominated assets, such as gold and Bitcoin, less appealing in the cryptocurrency marketDuring the last wave of dollar index highs, the Federal Reserve was either continuously raising interest rates or at least maintaining a high rate level, gradually making traditional assets (like the dollar and government bonds) the preferred choice for investorsIn contrast, cryptocurrencies, characterized by their volatility and risk attributes, appear increasingly unstable in an environment of rising interest rates and a strong dollar.

This strong dollar has also diminished the appeal of cryptocurrencies like Bitcoin as a safe-haven assetInvestors typically consider Bitcoin a hedge against inflation; however, the current hawkish rhetoric from the Federal Reserve and persistent monetary tightening have compromised Bitcoin's effectiveness as an inflation tool, especially given the capital inflows drawing toward dollars and U.S

Treasury yields.

In stark contrast to the dollar's bullish surge, Bitcoin and other cryptocurrencies displayed weakness in their market performanceWithin half an hour following Powell's speech, Bitcoin's price plummeted from $91,846 to $88,289, continuing a decline to a low of $86,700—a drop exceeding $5,000 and marking the first significant retracement since its historical highs.

According to Coinglass data, the past 24 hours have seen severe liquidations in the cryptocurrency market, with about 182,250 individuals liquidated and a total liquidation amounting to $504 millionThe largest single liquidation occurred on Binance involving an ETH/USDT position valued at $10.4696 million.

The exchange rate for Ethereum (ETH/BTC) has decreased to 0.0347, reaching a new low since April 2021.

Meanwhile, XRP (Ripple) has stood out amidst the market downturn, displaying an unexpected surge

XRP skyrocketed by 16% over the past 24 hours, breaking the $0.80 price barrier and reaching its highest level since July 2023.

What could be propelling XRP's surge during this tumultuous time?

For XRP, the potential shifts in regulatory landscapes are undeniably influencing its recent price increaseRipple has been embroiled in a legal battle with the SEC for nearly four years, standing at odds since Gary Gensler’s tenure beganWith Gensler's recent resignation, there is optimism that this change could benefit Ripple and potentially affect actions previously taken against other cryptocurrency firmsIf Gensler's successor adopts a more lenient stance toward the cryptocurrency industry, the market outlook for XRP might significantly improve, thus providing robust upward momentum for its price.

As expectations for rate cuts in December intensify, the market is poised for further uncertainty

Following the release of U.Seconomic data, expectations for a rate cut surged dramatically, with the probability increasing from below 60% to over 80%. While the market expresses optimism about potential rate reductions, remarks from Federal Reserve officials indicate differing perspectivesFed Governor Adrianne Kugler recently stated that while the market is eager for signals indicating rate cuts, the Fed should consider pausing rate cuts if inflation progress stagnates.

Goldman Sachs has also shared its forecasts for future interest rate trends, suggesting that the terminal rate in this round of rate cuts may exceed traditional neutral rate ranges, likely settling between 3.25% and 3.5%. Even after experiencing a round of rate cuts, the Federal Reserve's interest rates are expected to remain relatively high, thereby consistently exerting pressure on risk assets, including Bitcoin.

In summary, Powell's hawkish discourse and cautious outlook regarding future monetary policy have enhanced the attractiveness of the dollar and traditional assets, while the cryptocurrency market faces significant adjustment pressures