Bitcoin falls to $19.6,000 as investors continue to reflect on the Fed Chair’s comments
Good morning. Here’s what happens:
Prices: Bitcoin and Ether traded down over the weekend.
Insight: Analysts saw Fed Chair Jerome Powell’s speech for what it was: an unbridled commitment to taming inflation.
Watch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter that puts the latest moves in crypto markets into context.
Prices
Bitcoin falls below $20K
After clinging tightly to support above $20,000 for much of the weekend, bitcoin fell well below that threshold late on Sunday.
The largest cryptocurrency by market capitalization recently traded at $19,600, down more than 2% in the past 24 hours. Ether, the second-largest crypto by market cap, traded hands at about $1,430, down more than 4% as investors continued to chew on US Federal Reserve Chairman Jerome Powell’s promise to continue the monetary hawkishness the Fed enacted earlier this year.
The news disappointed some investors who were hoping for signs of Fed confidence that steps in recent months were taming inflation and that it may pull back from its recent diet of 75 basis point rate hikes.
“Macroeconomic uncertainty continued to weigh on the price of BTC, and while the PCE data turned negative (giving the market hope that the Fed could take a less aggressive stance going forward), [the] The Fed chairman’s call on Friday dashed those hopes as he warned against premature easing of policy,” Joe DiPasquale of crypto-asset manager BitBull Capital wrote to CoinDesk. “The market has reacted negatively to these comments, and we see Bitcoin testing the $20 support 000.”
Most other major cryptos were recently in the red with AVAX and ATOM down more than 9% and 6% respectively. XMR rose about a percentage point.
On Friday, bitcoin fell sharply from the $21,000 perch it held throughout the work week as Powell noted that inflation remains a serious threat. He said that “reducing inflation will likely require a sustained period of below-trend growth” that would create “softer labor markets,” among other things.
The ongoing strength of the labor market has repeatedly suggested that the economy has not fallen into recession. The unemployment rate of 3.5% is the lowest level since February 2020. “While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said.
“We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%,” Powell also said.
Stocks and crypto news
Crypto’s senuke fall followed stock markets closing significantly lower on Friday with the tech-focused Nasdaq and S&P 500 plunging nearly 4% and 3.3%, respectively.
In recent crypto industry news:
Japan is preparing to review existing corporate crypto tax rates in a bid to entice startups to stay in the country, local news agency Yomiuri reported. Japan’s Financial Services Agency (FSA) and the Ministry of Economy, Trade and Industry are considering a 2023 tax reform proposal that could exempt crypto startups that issue their own tokens from paying taxes on unrealized gains. And
But over the weekend, CoinDesk reported that Grayscale Investments LLC has fielded questions from the US Securities and Exchange Commission (SEC) about the firm’s “securities law analysis” of tokens in some of the less popular crypto trusts. The request, which Grayscale disclosed in little-noticed filings in June and mid-August, casts a shadow over the trusts’ viability at a time when the world’s largest digital asset manager is already dealing with a sharp decline in the value of its assets due to to the ongoing crypto winter.
BitBull’s DiPasquale wrote that “Monday’s open for stocks will be key, as more downside there could push BTC toward recent lows.”
“We will watch for market reactions to new lows and aim to accumulate BTC between $20,000 and $15,000,” he wrote.
Biggest winners
There are no winners in the CoinDesk 20 today.
Biggest losers
Insight
Here’s how Fed watchers viewed Powell’s Jackson Hole speech
Speeches by US central bankers receive more scrutiny than any other public official except US presidential speeches. They also get some of the strongest reactions from analysts, investors and others who make a living observing monetary policy and the economy.
Even by those standards, Jerome Powell’s comments at the Fed’s economic symposium on Friday drew particular attention, coming amid a flurry of often confusing economic indicators, including July’s decline in the consumer price index (CPI) that suggested inflation that had hit a 40-year high last month was decreasing. Would Powell be a hawk or signal a softening in rate hikes.
In the strongest terms, Powell said that inflation remained a threat to economic well-being and that the Fed would continue to raise interest rates. “We will continue with it until we are sure the job is done,” he said.
Here’s how some commentators from major research and financial services groups Powell view Powell’s comments and the likely future impact of ongoing monetary hawkishness:
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“They don’t want to be remembered as the central bank that missed inflation or even spurred inflation higher,” Brian O’Reilly, head of market strategy at Mediolanum International Funds, told The Wall Street Journal.
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“The process won’t be painless, and I think he’s more upfront about that,” Neil Dutta, head of U.S. economics at Renaissance Macro Research, told The New York Times. “The likelihood of recession increases, because that’s the solution to the inflation problem – that’s what they tell you.”
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Powell is not in the mood to have restrictive policies, and that should mean the economy will weaken steadily going forward,” Oanda senior market analyst Edward Moya wrote in an email. Powell drove home the point that once they are done raising interest rates, we should expect them to stay there for a long period of time… There was no dove pivot, but it appears that financial markets are approaching full pricing in the the remaining Fed rate hikes.”
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“Essentially, Powell is clearly saying that right now it’s more important to fight inflation than to support growth,” Jeffrey Roach, chief economist at LPL Financial, told CNBC.Important events
20:00 HKT/SGT (12:00 UTC): CleanSpark’s third quarter results
08:30 HKT/SGT (01:30 UTC): Australia Retail Sales (July/MoM)
13:00 HKT/SGT(5:00 UTC): Japan’s leading economic index (June)
CoinDesk TV
In case you missed it, here’s the latest episode of “All About Bitcoin” on CoinDesk TV:
Bitcoin falls below $21,000 as Fed Chair Powell warns inflation battle could be painful
Federal Reserve Chairman Jerome Powell’s hawkish speech sent bitcoin (BTC) prices tumbling, after the central bank chief warned that the war on inflation could be painful. “All About Bitcoin” took a closer look at what is happening in the markets.
Headings
Blockchain Startup Aims to Open $1T Diamond Market to More Investors: Diamond Standard believes that symbolizing diamonds will make it easier and more efficient to invest in the precious stones.
Grayscale, Reveals SEC Inquiries, Says Cryptos XLM, ZEC, ZEN May Be Securities: ZEC, ZEN and XLM “may currently be a security, based on the facts as they exist today,” Grayscale said in recent, little-noticed filings.
The CEO of CoinSwitch, in the wake of searches by Indian authorities, says the crypto exchange is “fully cooperating”: Singhal also sought to clarify that the “engagement with ED” is not about money laundering.
The Web3 domain name service may lose its URL because the programmer who can renew it is in jail: Eth.link expired on July 26 and will be available on September 5, according to GoDaddy.
The Merger May Negatively Impact DeFi Protocols, Stablecoins: Report: The move to proof-of-stake could reduce stablecoin values and shrink lending pools, according to DappRadar.
Longer readings
In defense of crypto speculation: Crypto needs speculation. The higher it is, the greater the potential for interference. (Chief Content Officer for CoinDesk, Michael Casey)
Other votes: The cryptogenies that vaporized a trillion dollars (New York Magazine)
Said and heard
“When the meme stock craze first emerged, many financial observers wondered whether it would survive the coronavirus pandemic, which also boosted crypto trading among people who were bored at home for months. It’s still a bit of an open question, but whether more companies are looking upside by actively courting grocers we could see ‘meme interest’ remain a significant benchmark in formal stock markets.” (CoinDesk columnist David Z. Morris)
