The recent intervention by the President of the US Fed, Jerome Powell, has put a brake on the bull run of Bitcoin’s price.
Powell stated that, in the next two Fed meetings, no further interest rate cuts are expected, causing the price of Bitcoin to drop below 64,000 dollars, after surpassing the 66,000 threshold in the previous days.
The relationship between Fed USA and the price of Bitcoin
The price of Bitcoin, as well as other cryptocurrencies, is often influenced by the decisions of the Fed, the central bank of the United States. Monetary policies, particularly changes in interest rates, can have a significant impact on traditional financial markets and emerging markets like the cryptocurrency market.
This bond has strengthened in recent years, as investors see in Bitcoin and other cryptocurrencies a possible store of value and an alternative to traditional financial systems.
The role of the Fed is crucial in maintaining economic stability in the United States and globally. Decisions regarding interest rates influence the cost of money, market liquidity, and, consequently, investors’ willingness to take risks.
When the Fed raises interest rates, the cost of money rises and investors tend to shift their capital towards safer assets, thus reducing exposure to riskier investments, such as criptovalute.
On the contrary, when the Fed cuts rates, financial markets find themselves with greater liquidity and investors are more inclined to take risks, which favors the rise of volatile assets like Bitcoin.
The words of Powell and the impact on the cryptocurrency market
During his conference, Jerome Powell clearly indicated that one should not expect a new rate cut in the next two Fed meetings. This statement immediately had repercussions on the cryptocurrency market. Investors, who had bet on a possible further rate cut, began to revise their expectations.
Before Powell’s words, Bitcoin had surpassed $66,000, reaching new weekly highs thanks to growing confidence in the possible continuation of accommodative monetary policy. However, Powell’s announcement dashed these hopes, bringing the price of Bitcoin back below $64,000.
This fluctuation demonstrates how sensitive the cryptocurrency market is to expectations related to monetary policies. Even though the Fed has not yet confirmed a definitive position regarding the next rate cut, Powell’s words were enough to change investor sentiment.
What to expect in the next Fed meetings
With the next Fed meeting scheduled for November 7, financial markets are trying to figure out what to expect.
After Powell’s announcement, the probability of a rate cut has been scaled back, and now many analysts consider a minimum cut of 25 basis points more likely, rather than a more significant intervention.
This possible downsizing of expectations has led many investors to adopt a more cautious attitude towards Bitcoin and cryptocurrencies.
The volatility of the cryptocurrency market, already high in itself, could increase further in the coming months, as we approach the next Fed decision.
However, a possible rate cut, even if minimal, could still favor the cryptocurrency market. If the Fed actually decided to reduce rates by 25 basis points, this could increase the liquidity available in the markets, thus favoring riskier investments such as those in cryptocurrencies.
In this context, Bitcoin could benefit from renewed interest from investors, especially if monetary policy were to remain accommodative for an extended period.
The future of the price of Bitcoin and the influence of the Fed USA
The decisions of the Fed will continue to play a key role in the evolution of the cryptocurrency market. If the Fed were to maintain a restrictive monetary policy to contain inflation, it is likely that the price of Bitcoin and other cryptocurrencies will be negatively affected.
On the contrary, a more expansive monetary policy, with further rate cuts, could favor a new wave of bull for Bitcoin.
In any case, investors in the world of cryptocurrencies will need to pay close attention to the signals coming from the Fed and closely monitor the statements of Powell and other members of the central bank’s board.
The cryptocurrency market, being still relatively young, is highly sensitive to macroeconomic policies and decisions of central banks.
The statements of Jerome Powell have demonstrated how the decisions of the Federal Reserve can influence the price of Bitcoin and, more generally, the entire cryptocurrency market.
While the market anxiously awaits the next moves from the Fed, it is evident that monetary policies will continue to play a crucial role in defining the price dynamics of cryptocurrencies in the coming months.