Jerome Powell’s speech, the new rise and fall of Bitcoin and cryptocurrencies
Good news, however, does not necessarily mean a long reversal of the trend, given that the problems created by Powell and the Fed are many and difficult to solve, and in some circles they have begun to cause fears for the worst. The reason why, in particular for those who want to invest in the world of cryptocurrencies, it is necessary to try to delve into the issue as much as possible.
BTC is one of the main sources of influence support, so it can be used as a source of income. And everyone knows about it. But let’s look at the facts:
rate increase by 50 basis points, balance reduction since June.
Those who were waiting for the fireworks were disappointed, but on the other hand, we have to admit that something concrete was done. Rates rose by 0.50%, as expected by the markets, and the Fed will begin to reduce its balance sheet from June. And again, exactly in line with Wall Street’s expectations. This allowed Bitcoin and the rest of the sector to withstand further declines and recover to much more attractive price levels. But, as you have noticed, not for long.
Another factor that returned some optimism to the markets, which had been pumped up with easy money for several months, was the almost clear exclusion of the possibility that a rate increase of more than 0.50% is possible at the next FOMC meetings. Given Powell’s own admission that inflation was out of control, many believed that this issue could be resolved.
Everything else is the fiction of the Feds
The rest that we have heard is not much different from the narrative that the Fed has been building for several months. Inflation was too high, but everyone understood this even without the intervention of the commander-in-chief of the Fed. The labor market situation, on the other hand, was good, although we cannot agree with Powell about the overall economic situation. But let’s continue in order.
● Inflation is out of control
This is the undeniable truth — and we’ve been talking about it on these pages longer than the Fed. Prices are rising rapidly and continue to rise, the peak may be over, but it is still far from returning to normal life, at least in our opinion.
● Reliable labor market
The data from the US labor market is good, but not so good as to allow, as Powell claims, any freedom of action. Social problems may already be exacerbated by inflation. The cooling of the labor market can have serious consequences for the stability of the country.
● Comforting economic data
If we were engaged in a cherry picket, that is, carefully selected only good data, we could agree. But this is difficult to do when the US GDP is losing significant percentages, and the quarterly reports of many of the country’s leading companies are not distinguished by outstanding results. No matter what Mr. Powell says, the situation cannot be called calm, and the plan he has outlined for the coming months, namely a constant increase in interest rates, may meet significant resistance.
How is the scenario changing in the world of cryptocurrencies?
To date, the market has already discounted the upcoming increase, on which a quick consensus has formed, making a pullback for consolidation in the region of — 8%. It will be necessary to assess the stability of the dollar to levels that are among the highest in history. If this strengthening of the dollar fails, the cryptocurrency and Bitcoin market may continue to “gnaw” some positions.
In all likelihood, sideways movements are expected for some time.
And all this in a market that is difficult to read. Which, however, seems unlikely, at least as far as Bitcoin is concerned, a return to the lows below $30,000 that we saw a few months ago. This is a sign that interest, including financial interest, in this world continues to grow.