Investing.com – While yesterday’s new lows are largely attributed to concerns about stricter enforcement of the cryptocurrency ban in China, it shouldn’t be forgotten that the current drop in BTC began last Wednesday, facing a more aggressive – than expected meeting Fed.
Indeed, the central bank announced that it plans to raise rates earlier than the market expected. However, one of the advantages of Bitcoin, put forward by its advocates, is the fact that its money supply cannot be increased, unlike fiat currencies, which mechanically lose value due to the dovish policy of central banks.
In short, the fact that the Fed is planning to raise rates earlier than expected lowers Bitcoin’s comparative advantage in this regard, which explains the cryptocurrency’s bearish reaction to the hawk surprises of the past week.
Fed Pushes Bitcoin Back Up After It Falls
However, during the day and evening yesterday, the Fed qualified for this position, which appears to have helped bitcoin recover with $ 30K in cheap purchases.
Both Mr. Powell and New York Fed Chairman John Williams warned that the economic recovery will take longer before stimulus cuts and rate hikes become appropriate.
“We will not raise interest rates in advance because we are afraid of possible inflation,” Powell said on Tuesday during a hearing in a committee of the US House of Representatives. “We will wait for evidence of real inflation or other imbalances.”
Williams, for his part, said that Fed officials will closely monitor economic data to determine when it is appropriate to start adjusting monetary policy, stressing that “there is still a long way to go.”
“The latest warning signs from the Fed … all indicate that September is the meeting at which the Fed, based on current trends, is likely to announce that substantial further progress towards its goals has been made or is in progress.” Ray Attrill, head of currency strategy at National Australia Bank in Sydney, wrote in a note to a client, predicting the phase-out is unlikely to start before early next year.
“Yesterday’s comments led the markets to move somewhat away from last week’s convulsions,” he said.
As a result, we can estimate that comments from the Fed, which again leaned more towards the dovish side of the monetary policy spectrum, may have played a role in Bitcoin’s strong rebound from yesterday’s lows.
Indeed, the cryptocurrency has climbed to a test threshold of $ 34,000 after yesterday’s foray below $ 30,000, returning about 15% in 12 hours.
However, as we pointed out in another article,
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