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Bitcoin Will Continue to Move Sideways Until Fed Meeting, Crypto Industry Executive Says
Key points
- Bitcoin fell 2.7% after Fed Chairman Powell said he would maintain higher interest rates.
- Cryptocurrency markets are likely to be subject to volatility due to the Fed’s cautious approach to rate cuts.
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Fed Chairman Jerome Powell spoke in Sintra yesterday and doubled down on his recent moderate tone. Powell reiterated that the Fed needs to be more confident before cutting interest rates, stressing that 4% unemployment is “still very low,” the return of disinflation, and that he does not expect 2% inflation this year or next.
As a result, Bitcoin (BTC) has pulled back 2.7% over the past 24 hours and has been missing the $60,000 price level for much of Wednesday. Moreover, the outlook doesn’t look bleak just in the short term after Powell’s remarks.
Ben Kurland, CEO of DYOR, points out that disinflation is generally considered a favorable indicator, but the Federal Reserve’s insistence on requiring more collateral before lowering interest rates indicates that stability in the economic environment has not yet been achieved. “This prevailing uncertainty is expected to translate into volatility in cryptocurrency markets,” he added.
In particular, Kurland said the Fed’s forecast that 2% inflation will not be achieved this year or next, coupled with a very large and unsustainable budget deficit, raises concerns about long-term economic stability.
Furthermore, while a 4% unemployment rate shows resilience, it also implies that the Fed could keep interest rates higher for a longer period of time, which has traditionally held back investment in riskier assets like cryptocurrencies.
“Overall, Powell’s cautious approach suggests that immediate rate cuts are pretty much out of the question, which should lead to sideways or bearish trends in cryptocurrency markets until the Fed meets again to reassess the situation.”
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