Fed's Powell's Speech, Data Release in Focus: How Will Crypto React?

As the crypto market faces increased volatility in the early Wednesday session, all eyes are now on Federal Reserve Chair Jerome Powell's impending speech and retail sales data for March, released today.

Powell is scheduled to speak at the Economic Club of Chicago on Wednesday on his outlook for the U.S. economy. Any clues regarding interest rate changes, inflation control or economic growth might have implications across all financial markets, including cryptocurrencies.

If the Fed chair strikes a hawkish tone, signaling higher-for-longer interest rates, risk assets such as cryptocurrencies could face short-term selling pressure. On the other hand, if Powell takes a dovish tone, Bitcoin and other crypto assets may rebound amid hopes of lower interest rates.

Ahead of Powell’s speech and the economic data drop, traders are bracing for volatility and, possibly, opportunity. Whether it is a rally or a retreat, the next few days are set to test the market’s appetite for risk.

What's next?

Bitcoin and other major cryptocurrencies tumbled as profit-taking followed Tuesday's rise. Bitcoin plummeted over 3%, while XRP, Dogecoin, Cardano and Chainlink plunged more than 4%. Pi, Celestia, Bonk, Jasmy and Flare fell about 10%.

Investors digested the retail sales data for March, a key report that indicates consumers’ willingness to spend during a period of increased economic and inflation uncertainty. Dow Jones economists expect a 1.2% increase from the previous month, up from 0.2% in February.

Investors will also look to industrial production data and monitor a speech by Federal Reserve Chairman Jerome Powell later in the day.

According to Coinbase Institutional, the cryptocurrency market may be entering a bear period, with severe losses and stagnation anticipated. Bitcoin's slide below its 200-day simple moving average portends a crypto winter ahead.