Sunday, August 14

Bitcoin, stocks and commodities correct after Fed chairman mentioned a policy change

The global financial market took a hit on November 30 after comments from US Federal Reserve Chairman Jerome Powell hinted that inflation and the Omicron Covid-19 variant are growing threats and that the policies of easy money from the bank could end sooner than anticipated.

Prior to Powell’s comments, Bitcoin (BTC) had been on the rise and the digital asset had rallied 6% from a low of $ 55,840 in the early trading hours of November 30 to an intraday high of $ 59,200, but the price went down again. $ 57,000 after the Fed’s statements.

BTC / USDT 4-hour chart. Source: TradingView

At the time of this writing, Bitcoin has managed to climb back to $ 58,000, but a number of technical indicators indicate that traders are not confident in BTC’s next move.

Stocks and commodities take a hit

It wasn’t just Bitcoin that was hit hard by the Fed’s comments. According to CryptoQuant economist and analyst Jan Wuestenfeld, the dollar index (DXY) rose while the DOW, gold and other equity indices fell.

DXY vs. Gold vs. BTC / USD vs. SPX. Source: Twitter

Wuestenfeld said:

“The US dollar index is appreciating on Powell and he comments that the Fed could speed up the set-up (no matter how credible it is). Everything else goes down. Gold included “.

Related: Vladimir Putin says cryptocurrencies ‘carry high risks’

The Fed “behaves binary”

Nik Bhatia, a market analyst and former treasury employee, provided deeper insight into the Fed’s actions, highlighting the fact that the Fed “does not have the ability to react to dynamic conditions” and instead, ” behaves binary “.

Bhatia said:

“If things go well, politics can be toughened. If the economy is in trouble, relax the policy. “

According to Bhatia, “inflation is accelerating in the United States” with “leading statistics pointing to multi-decade high increases in aggregate price levels.”

At the same time, the Fed has implemented “essentially easier monetary policy than ever,” prompting Bhatia to warn that “with inflation waking up, this will soon come to an end.”

Bhatia said:

“The Fed is clearly heading for a policy error in which it tightens policy even as long-term growth and inflation expectations fall, due to tighter monetary policy (that’s why it is called a policy error) “.

It is no longer “temporary inflation”

Interestingly, Powell’s comments acknowledged that the one-year mantra of “transitory inflation” is coming to an end, and the chairman of the Federal Reserve suggested that it is time to “retire” the transitory narrative.

While it’s refreshing to see a bit more honesty coming from the Fed, cryptocurrency expert Anthony Pompliano noted that the average person knew early on that inflation was not “transitory” in nature and will likely remain a problem until 2022.

The overall cryptocurrency market capitalization is now $ 2.638 trillion and Bitcoin’s dominance rate is 41.2%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trade move involves risk, you should do your own research when making a decision.