Bitcoin slumped below $27,000 as the Federal Reserve and Jerome Powell continue to focus on inflation. The central bank confirmed most expectations with its decision to raise interest rates by 25 basis points. Other major cryptos are largely red. But analysts are still hopeful!
After the interest rate decision, Powell spoke Bitcoin fell!
Bitcoin (BTC) slumped below $27,000 as the US Federal Open Market Committee (FOMC) raised interest rates by a quarter point this time, as was generally expected on Wednesday. The decision reinforces the Fed’s concerns that inflation remains problematic. Fed Chairman Jerome Powell said in a statement after the rate hike decision that the FOMC is committed to returning inflation to its 2% target.
Still, in a statement accompanying Wednesday afternoon’s announcement, the FOMC also acknowledged that banking this month is nearing a meltdown, noting that “recent developments will likely result in tighter credit conditions for households and businesses, putting pressure on economic activity, hiring and inflation.” .
Leading crypto Bitcoin was trading at around $27,030, down 4.1% in the last 24 hours. The dollar trade pair dropped as low as $26,815 at one point on the Coinbase exchange. cryptocoin.comEarlier on Wednesday, the price of BTC rose as high as $28,815 and hit its highest level since June 10. That’s because some investors hoped the Fed would put an end to the year-long diet of hawkish interest rate hikes amid recent bank failures. But the Fed dashed those hopes.
Analysts are not hopeless for BTC
Still, given the disasters of the banking industry, a number of analysts are optimistic about Bitcoin’s price in the near future. Bitcoin Opportunity Fund James Lavish comments, “Bitcoin has benefited from the recent turmoil and now the possibility of the Fed tightening to be over,” commented James Lavish. But Lavish says he can still expect volatility as the recent banking crisis continues. In this context, he predicts, “We are heading towards a recession, or worse, a much larger credit event occurring.”
“While this rate hike is negative for risky assets in general, it is positive for Bitcoin and gold as it puts more stress on the banking industry,” said Samir Kerbage, chief investment officer at crypto asset manager Hashdex.
“Banks are really struggling,” said Vineeth Bhuvanagiri, managing director of Emurgo Fintech, the co-founder of the Cardano blockchain. Authorities have to turn to massive liquidity injections into the financial sector to support them. And bank runs are forcing investors to rethink what it means to actually own assets. That is, they realize that deposits with banks can carry large counterparty risk,” he explains.
“People are now accepting Bitcoin as a store of value!”
Meanwhile, the labor market remained strong, with the latest weekly decline in US unemployment benefits claims. “I think Powell would be very sensitive about surprising the market,” said Ben McMillan, chief investment officer at crypto asset manager IDX Digital Assets, before the decision. However, McMillan suggests he sees more bullish sentiments against risky assets. In this context, he comments, “We noticed that people are now starting to think of Bitcoin as stores of value, just like valuable commodities or fixed assets.”
Brent Xu, CEO and co-founder of Umee, a Web3 bond market platform, states that Bitcoin has shown remarkable strength during this global crisis involving banks. “It could be something like a mini bull run,” Xu said. However, I think you should be careful here. Given that inflation is not yet under control, the Federal Reserve may continue to raise interest rates higher than expected (i.e. beyond this last 25 basis point increase). Therefore, there may be a pullback. That means it is too uncertain at the moment for more definitive decisions to be made.”
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