Last week, US Federal Reserve Chairman Jerome Powell indicated that “the time has come” to ease monetary policy, but confirmed that interest rate cuts are on the horizon in September.

“The direction of travel is clear and the timing and pace of interest rate cuts will depend on inputs, the evolving outlook and the balance of risks,” Powell told attendees at a Jackson Hole symposium hosted by the Federal Reserve Bank of Kansas City over the weekend .

Following the chairman’s dovish remarks, Bitcoin rallied from US$60,600 on Friday, August 23, to over US$64,000 on Sunday.

Crypto ETFs were also some of the best-performing assets ahead of the announcement, according to data from Global X.

Namely, during the week ending August 23, the DigitalX Bitcoin ETF (BTXX), Monochrome Bitcoin ETF (IBTC), and Global X 21Shares Bitcoin ETF (EBTC) posted one-week returns of between 3 and 4 percent.

Meanwhile, the VanEck Bitcoin ETF (VBTC) returned 4.5 percent on the week, and the Betashares Crypto Innovators ETF (CRYP) delivered an impressive 6.1 percent.

Explaining the move, Mark Jocum, investment strategist at Global X, noted that investors wanted to see a change in Fed rhetoric that Powell delivered.

"The market is pricing in an almost 100 percent chance of a cut in September ... whether it's a 25 basis point cut or a 50 basis point cut, any rate cut is usually pretty good for risk assets," Jocum told InvestorDaily.

"This is simply due to the academic arithmetic that lower interest rates or a lower discount rate when you calculate the long-term value of an asset helps to raise their prices in general."

Jockum added that Powell's comments injected an "animal spirit" into the market.

“When there are these animal spirits, cryptocurrencies are really on the far right end of the spectrum when it comes to risk. So it bodes pretty well for those prices to potentially go up over time,” he said.

He noted that Powell's comments came at a good time for crypto markets, as the asset class has seen several gains in recent weeks.

“The demand for ETFs continues to grow. In the US year-to-date, we've seen over $18 billion going into US Bitcoin ETFs,” he said.

“Locally, we're seeing over $100 million [bitcoin] ETF this year, just last month was $30 million.

"Then you also have an election cycle and you've seen people like Donald Trump who is very much in favor of cryptocurrency in terms of mass adoption and greater accessibility."

Highlighting ETFs as a strong point of crypto exposure, Jocum pointed out that Morgan Stanley recently expanded its US platform to include a Bitcoin ETF, potentially further fueling the market's momentum.

"So there are a lot of headwinds."

Bitcoin retreats

Despite these headwinds, the price of Bitcoin gave up its weekend gains for a few days, falling below US$60,000 on Tuesday.

While the reason for these moves is not always immediately clear, Jocum suggested that liquidations in the futures market, particularly from neighboring cryptocurrencies such as Ethereum, may have played a role.

“There may also be a fear of oversupply, given the US government [bitcoin] holding,” he said.

Trump revealed last month that he plans to make the US the "crypto capital of the planet" by maintaining a "strategic national stockpile of bitcoins" on home soil, with the presidential candidate saying he would "never sell" more than 200,000 to the nation bitcoin accumulated from asset forfeiture through law enforcement actions.

"Anytime there's an oversupply in the market that gives us a scarce asset, that can affect prices," Jocum said.

But the recent drop in prices may also just be a sign of the season, Jockum added, noting that August is generally a "quiet month" for crypto.

"Even though we've seen a bit of a dip in cryptocurrency prices, I mean, bitcoin is still up 30% to 40% year-to-date and over 100% in the last 12 months," he said.