Bitcoin has quickly retreated to $60,000 per bitcoin after one rich bitcoin buyer claimed that they’ve flipped on bitcoin. The bitcoin price has fallen about 15% in the previous month, as fears of a “true correction” grow.
Now that one of the greatest supporters of bitcoin has stated that the digital asset may someday displace the US dollar, Federal Reserve Chair Jerome Powell has warned of a “critical period” for the Fed and labeled the current levels of deficit as “unsustainable.”
According to the report, Powell stated at the European Central Bank’s Portugal conference that while the level of debt we have is entirely sustainable, the path we are on is not. Powell further stated that the Biden administration was taking unwarranted risks by running a massive deficit during a period of full employment and that you cannot run these levels in prosperous economic times for very long.
The United States’ rapidly growing $34 trillion debt load prompted Treasury Secretary Janet Yellen to offer a dire warning in May, which some believe might help drive the price of bitcoin to $1 million over the next 18 months.
In recent months, traders of bitcoin, cryptocurrencies, and stocks have been closely monitoring the Fed for indications that it may start reducing interest rates. As a result, economists have been forced to lower their initial projections of seven rate cuts by 2024 to only one or two.
In response to a query about his main concerns, Powell stated, “That’s really what I think about in the wee hours—getting the balance on monetary policy right during this critical period,” according to the AP.
The Federal Reserve hinted last month that it would only make one rate drop in 2024 and that further reductions would be made in 2025. The Fed is under pressure to lower interest rates after setting records for rate hikes in response to massive stimulus spending and money printing during the Covid era, which caused inflation to skyrocket.
Russ Mould, investment director at AJ Bell, stated in an email that Powell stated the U.S. was back on a “disinflationary path,” but he also noted that more data was needed before the Fed would consider lowering rates. From the perspective of the market, the latter sentence sounds a bit like a broken record, therefore the most significant aspect of Powell’s speech was the mention of disinflation, which investors took to suggest there was a stronger argument for lowering rates soon.
Now, all eyes will be on the Fed’s June meeting minutes, which will be released on Wednesday, and the employment report on Friday, which could “cement” predictions of a September interest rate decrease if it indicates that hiring has slowed.
If Friday’s jobs report is softer than anticipated, it would probably strengthen the case for the cut, which the markets currently give a roughly 70% likelihood of happening. However, this estimate may be a little low.
The world’s largest asset management, BlackRock, has issued a warning due to the higher-for-longer interest rate environment. Its analysts claim that a “unprecedented” scenario is developing that might negatively impact the price of bitcoin and the cryptocurrency sector.
The analysts at BlackRock, which has spearheaded the Wall Street spot bitcoin exchange-traded fund (ETF) revolution and helped manufacture a price boom for the cryptocurrency this year, believe that central banks will be compelled to maintain interest rates higher than they were before to the epidemic in order to combat ongoing inflationary pressures.
