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The price of bitcoin is down around 40% from its peak of nearly $70,000 per bitcoin late last year, with the price of ethereum also nearly halving. Other major coins, including Binance’s BNB
Now, after Federal Reserve Chairman Jerome Powell announced that a half-percentage-point interest rate hike was on the table at next week’s meeting, the market is gearing up. for the central bank to start trimming its massive $9 trillion portfolio of assets as it battles runaway inflation.
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“Macroeconomic uncertainty has driven all risk assets down over the past few months, including bitcoin,” said Joe Haggenmiller, head of markets at leading crypto-finance firm XBTO Group, in comments by email.
“The price volatility in the bitcoin market over the past few weeks can largely be attributed to its correlation with other risky assets, which have generally moved in response to the conflict in Ukraine, supply chain issues due to rising Covid cases in China, and ongoing interest rate hikes and future Federal Reserve balance sheet machinations.”
At the start of the Covid-19 pandemic, the Federal Reserve launched an unprecedented stimulus program that saw its balance sheet double and interest rates fall to historic lows as it flooded the markets with liquidity in a bid to to offset the economic damage of Covid-19 and lockdowns. As the pandemic began to recede and inflation soared, the Fed turned to an attempt to cool the economy.
“It is appropriate in my opinion to go a little faster [than the Fed has recently],” Powell said last week, speaking after a roundtable with European Central Bank President Christine Lagarde hosted by the International Monetary Fund, adding that he thought “there was something in the idea of loading these movements upstream.
However, economic data this week showed that the US economy contracted in the first three months of the year, contracting 0.4% in the first quarter, its weakest quarter since the early days of the pandemic.
“This is bullish for risk assets like bitcoin and stocks in my view as the Federal Reserve may become less hawkish to avoid a recession,” wrote Marcus Sotiriou, an analyst at the UK-based digital asset broker. -United GlobalBlock, in an emailed note.
Bitcoin, crypto and exchange traders are watching closely for any signs that the Fed will deviate from its telegraphed move at its meeting this week.
“An increase of more than 50 basis points, deviating from the current consensus, could lead to lower risk markets, especially bitcoin,” Haggenmiller added. Regardless, the bitcoin market has proven to be relatively resilient over the long term throughout periods of uncertainty.
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Meanwhile, the bitcoin and crypto community applauded a series of positive developments this week, including the Central African Republic becoming the second country after El Salvador to adopt bitcoin as legal tender and investment giant Fidelity announcing the launch of 401 000 bitcoin accounts.
“Recently, bitcoin has reached a new stage of mainstream adoption where businesses and countries are now onboarding bitcoin without waiting for the price of bitcoin to skyrocket,” said Alex Adelman, CEO of the bitcoin rewards app. Lolli.
“This lack of correlation between price movements and growing mainstream adoption demonstrates that more and more institutions are grasping the immense utility of bitcoin as a currency and store of value and its inevitable and powerful role in our financial future.”
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Bitcoin And Crypto Are Now Prepared For A $9 Trillion Fueled Earthquake As The Price Of Ethereum, BNB, Solana, Cardano, XRP, Terra’s Luna And Avalanche Crater TechRadar
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