Bitcoin, Ethereum, and other top four crypto assets crashed from this week’s highs on April 21 following Jerome Powell’s statements at an IMF economic debate.
Commenting on the rampant inflation and the Federal Reserve’s conviction to reign in rising prices, the chair said the Federal Reserve (FED) would stop at nothing to intervene. Immediate strategies, he elaborated, include more aggressive rate hikes, including a 50-basis point increment in May 2022.
It is appropriate in my view to be moving a little more quickly… I also think there is something to be said for front-end loading, any accommodation one thinks is appropriate. I would say 50 basis points will be on the table for the May meeting.
Inflation in the U.S. rose to 8.5 percent in March 2022, the highest since 1981. Even though the FED maintains that inflation is transitional, analysts note that the central bank is beginning to take concrete steps to cushion its citizens against purchasing power erosion.
One of the many steps besides tapering bond purchasing is accelerating interest rate hikes. Therefore, while central banks like the US FED and the BoE begin to unwind their loose monetary policies and end bond purchasing programs, risk-on assets, mostly crypto, will be on the receiving end.
As the U.S. takes the lead, crypto and other safe-haven assets would likely be in for a rough year, descending deeper from their record highs.
In response to these comments, Bitcoin retraced from April 11 highs, dropping to as low as $40k in the early April 22 session. The coin remains under pressure at spot rates, under-performing the rampant greenback buoyed by Jerome’s comments, and may drop to Q1 2022 levels.
The correction is amid the widespread adoption of Bitcoin and cryptocurrencies. Bitcoin, for instance, is considered a safe haven and hard money because of its deflationary properties.
Pumped by record-low interest rates in 2020 through 2021, Bitcoin prices soared from around $7k in early 2022 to over $69k in late 2021. The surge was attributed to the shift in capital to risk-on assets, including gold, as a shield against inflation.
At spot rates, Bitcoin is trading at $40.5k, down five percent in the past 24 hours.
- kanchanara-5ixVD22x22o-unsplash: Photo by Kanchanara on Unsplash