Fed’s ‘Great Pause’ Could Be Big for Crypto and the Price of Bitcoin, Ethereum, BNB, XRP, Solana, Cardano and Dogecoin
Bitcoin
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Bitcoin prices have fallen to around $20,000 per bitcoin as traders digest the long-awaited bombshell comments from Federal Reserve Chairman Jerome Powell last week, in which he vowed to keep raising interest rates to bring down inflation. Ethereum, meanwhile, is on the brink of its own earthquake that could devastate the ethereum price and other top ten coins BNB
Now, after a crypto exchange CEO warned “anything could happen during the current crypto winter,” some are predicting that the Fed could soon trigger a run on bitcoin and crypto prices.
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Federal Reserve Chairman Jerome Powell has said he would be willing to raise borrowing costs as high as … [+]
“You will basically see the ‘big break’ from the Fed,” Bill Barhydt, CEO of crypto asset management platform Abra, told Think Crypto podcast, which explains the “big pause” will come when the Fed’s “dramatic rate hikes” have had “the intended effect of slowing inflation” and the Fed puts interest rate hikes on hold.
Last week, Fed Chairman Jerome Powell said he is prepared to raise borrowing costs as high as necessary to reduce inflation, which is currently running at more than three times the Fed’s 2% target. US inflation cooled somewhat in July, the latest figures showed, but the consumer price index (CPI) was still up 8.5% from a year earlier.
“I think that’s really going to play out for stocks and crypto as the money supply starts to increase dramatically as a result of the Fed break and expectations in the bond market that we’re going to get back into the kind of downward channel that interest rates have been in for the last three decades,” Barhydt added, predicting the “big break” will occur in October and continue until early 2023.
The bitcoin and crypto markets have crashed along with the stock markets this year, with the bitcoin price losing around 70% from its all-time highs of nearly $70,000.
“Historically, such big moves often provide a good time to buy,” Dan Ashmore, an investment expert at Invezz, said by email. “The drawdown could be severe (and could still get worse), but over time it’s highly likely that the market will rebound above its current level — especially since the Fed is unlikely to remain on the sidelines if things get really bad.”
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The Bitcoin price has fallen back towards its all-time lows of below $20,000 per bitcoin this year … [+]
The Federal Reserve is expected to raise interest rates again at its September meeting, with futures contracts tied to Fed policy reflecting traders’ bets that interest rates will rise another 1.5 percentage points before the end of the year.
“As these increases ripple through the economy, income projections will fall and the recession will hit, or hit harder, if you want to say we’re already there,” Ashmore said. “The key question, then, is: ‘Does the Fed turn and fire the money printer?’ Ultimately, this may be more of a political question than an economic one.”
In July, data showed the US economy shrank for a second straight quarter, a common measure of a technical recession, with many economists predicting a bleak economic outlook.
However, others have argued that the Fed will keep the pedal to the metal to ensure that inflation does not creep back.
“The Fed’s headline rate still looks very low relative to its own history and other periods when inflation drove the Misery Index [the economist Arthur Okun’s aggregate of the rate of inflation and the rate of unemployment] up, suggesting it will continue to hammer inflation, even if it hurts the labor and financial markets in the process,” Russ Mould, chief investment officer at broker AJ Bell, wrote in an emailed comment.
