As Bitcoin falls below $22,000, the rest of the market closely follows, sometimes escalating.
 |
| FED Chairman Jerome Powell |
Don't fight the Fed: this is an aphorism we kept with us from the previous crisis, which occurred in 2008 and 2009. Yet Federal Reserve Chairman Jerome Powell appears to want to live up to this cliché by demonstrating that he is constantly holding the purse strings, and hence the markets, with the Federal Reserve behind him. A few words said on Tuesday afternoon were enough to send the markets into a tailspin, although one that was mostly confined for the time being.
As Bitcoin falls below $22,000, the rest of the market closely follows, sometimes escalating. So what actually is happening? And who will triumph between the Federal Reserve and markets that appear to be questioning Washington's credibility?
One piece of evidence that many may have overlooked is that, despite projections for a 50 basis point increase in interest rates at the upcoming FOMC meeting, Bitcoin has mostly held. We can invest with FP Markets - here you can also discover a FREE DEMO ACCOUNT to invest risk-free - an intermediary that enables us to operate on Bitcoin and all the other major cryptocurrencies, even with leverage and in quick order. We can also take use of what is provided by MetaTrader4 and MetaTrader5.
Powell comes out: Bitcoin and the rest of the crypto industry are in decline.
We're at it again. When Jerome Powell tries to be harsh, the markets fall. This was the situation with Bitcoin, which fell below $22,000 but immediately recovered. This was also true for the rest of the crypto industry, which was hit hard.
In actuality, the shock was mitigated since prices quickly rebounded to pre-Powell levels, indicating that the Federal Reserve Chairman is still not totally convinced. Or, more accurately, he doesn't appear to be able to terrify the markets all that much.
Final rates are likely to be higher than budgeted.
The markets were spooked by the first statement. In layman's terms, this suggests that there might be more than the 50/75 bps increase in two or three sessions that the markets were expecting.
If the data warrants it, even 50 bps in a single session is possible.
This is exactly what Jerome Powell hinted about. Should the statistics, namely inflation, call for it, the Federal Reserve will be ready to seize the bull by the horns. We shall only find out if he is a market bull or not by living.
The next FOMC meeting, slated for March 22nd, will be 25 basis points vs 50 basis points. All of this comes after the inflation statistics, which will be released next week instead.
We'll see: what is certain is that the Federal Reserve is hiding behind a still-strong labor market and growth prospects in the United States that are not yet constrained. But, the lament from industry and services began months ago: be cautious not to pull too hard on the rope, as the recession is just around the corner. Who will triumph? Who knows whether what remains of this crisis will be a war against the Fed.
The author Gianluca Grossi is the editor-in-chief and analyst for Criptovaluta.it