Statements Affecting Bitcoin and Gold from the FED President!

Fed Chairman Jerome Powell has signaled the end of rate hikes. After that, Bitcoin headed towards $27,000, while gold gained more than 1%.

Critical statements from Fed Chairman Powell

In his speech at the “Perspectives on Monetary Policy” panel held before the Thomas Laubach Research Conference on May 19, US Federal Reserve Chairman Jerome Powell shared his views on forward-looking expectations from the Fed. Starting his speech with inflation, Powell stated that the current inflation is well above the 2% target set by the Fed. Powell noted that inflation poses significant challenges, especially for those at the fringes of society, and that the central bank is “strongly determined” to return to this target from the current 4.93%. In addition to these, Powell said:

Price stability is the foundation of a strong economy. It is the responsibility of the central bank to maintain this.

Powell also noted that the interest rate may not need to rise that much during the speech. The Fed Chairman noted that tighter financial conditions mean “our policy rate may not need to rise as much as it otherwise would to meet our targets.” Concerns about the next meeting are high as the market expects the Federal Reserve to refrain from raising interest rates.

According to the FedWatch tool, the probability of the Fed adhering to the current Fed Funds target of 5% – 5.25% is 77.6%, down from 84.5% last week. The probability of an increase of 25 basis points (bps) is still at a low level of 22.4%.

BTC price volatility is back as Powell speaks

All eyes were on Fed Chairman Jerome Powell, speaking at the Thomas Laubach Research Conference in Washington today. The nerves were tense in the markets the previous day, as unemployment data, along with other Fed officials, increased expectations that interest rate hikes would continue. Powell underlined the following points in his speech:

While financial stability instruments help calm conditions in the banking sector, developments here also contribute to tighter credit conditions. It’s also likely putting pressure on economic growth, hiring and inflation. As a result, our policy rate may not need to rise as much as it normally would to meet our targets. Of course, the extent of this is extremely unclear.

Powell added that markets’ divergence from the Fed on rate hike prospects “seems to reflect a different forecast that inflation is falling much faster than officials themselves believe.” For this reason, Bitcoin has appeared particularly sensitive to suggestions that interest rate hikes may end sooner or later.

Just before, a snapshot of the liquidity on the Binance BTC/USD order book, uploaded to Twitter by tracking resource Material Indicators, showed that there was no significant support above $26,000. Meanwhile, the question of liquidity was slowly escalating in the region near the spot price of around $27,300.

Bitcoin price shows mixed reactions

The initial reaction of the world’s largest cryptocurrency to Fed Chairman Jerome Powell’s speech was mostly bullish, with Bitcoin price climbing above $27,200. However, at the time of this writing, BTC remains above the 100-day Exponential Moving Average (EMA) and is trading at $26,873.

BTC 1-day chart

After the 2% drop on May 18, Bitcoin price slumped below $27,000, which has acted as a key technical and psychological support level since mid-March. It is important for BTC to stay above $28,000 for it to rise above $28,000 and turn the 50-day EMA line into a support level.