Fed chairman Jerome Powell took an aggressive stance in his annual Jackson Hole speech. At the annual conference hosted by the Kansas City Fed, respected economists gathered to determine the Fed’s economic policy. Its aggressive stance has many experts fearing a cryptocurrency crash.
Interest rates will crash the cryptocurrency market
The latest data revealed extremely high inflation. The Fed is responsible for cooling inflation through aggressive policymaking. One way to do this is to raise interest rates. A larger-than-expected rate hike also turns into a bloodbath in the market. Following the June CPI data, which showed the highest inflation in the last four decades, the Fed increased interest rates by 75 basis points. As a result, markets fell, including the crypto market.
The latest CPI data did not cause similar volatility as high inflation levels have already been priced in. The expectation was that the Fed would change direction as inflation would eventually cool down. Back-to-back positive inflation data reinforced this narrative.
Could Bitcoin bounce back after Powell’s gloomy speech?
Fed chairman Jerome Powell’s speech was nothing short of good news for the crypto markets. Bitcoin and the rest of the crypto market were showing strong gains due to positive inflation data. Bitcoin is up 4%, while Ethereum is up more than 5%. However, Powell took an aggressive stance in his Jackson Hole speech. As a result, the first step of the crypto sales we mentioned above has been taken. Although Bitcoin held out for a while, it eventually failed to hold $20,000.
Meanwhile, the expectation from Powell was the Federal Reserve’s reversal from the Quantitative Tightening and rate hike policy. However, key Fed officials, even pigeons like Minneapolis Fed chairman Neel Kashkari, have taken an aggressive stance. Jerome Powell has also clearly taken a tough stance. He explained that fighting inflation is the main goal of the Fed. He warned households and businesses of impending pain.
The market reacted sharply and fell significantly. The S&P 500 also fell more than 3%. Experts say Powell’s words are a tool to curb consumer and business enthusiasm. As Kriptokoin.com, we have quoted the main topics from Powell’s Jackson Hole speech in this article.
How will the cryptocurrency market bounce back?
Crypto phenom Lark Davis revealed that Powell’s 10-minute speech wiped out nearly a trillion dollars from stocks and crypto. However, Michael van de Poppe, CEO of Eight Global, gave some hope. According to Poppe, the Fed cannot continue its hawkish policy. If so, Bitcoin and Ethereum could also make a comeback as future inflation data reveal cooling inflation.
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