Bitcoin, Inflation, Recessions and the Federal Reserve’s Potential Change of Course

Bitcoin has been fairly stable again this weekend around USD 19,000 and stands at USD 19,300 at the time of writing. It was another quiet weekend for the crypto market, which makes more and more analysts think it is a case of the calm before the storm.

Inflation and the Federal Reserve

The two major themes currently gripping the market are skyrocketing inflation and a potential global recession. After the announcement of the US Consumer Price Index for September last week, which was 8.2 percent higher than hoped, the markets fell for a while. However, it didn’t take long for Bitcoin to recover from that price drop and even move towards $20,000.

Meanwhile, the price is “back to square one” and Bitcoin is trading quietly again around USD 19,000. For the entire market, it is now mainly waiting for a change of course from the Federal Reserve, the US central bank, which is currently in almost complete control. They have a monopoly on the dollar and US interest rates. Once they, for whatever reason, stop raising interest rates, we can look back up.

Recession approaching?

To force the Federal Reserve to change course, something has to break within the economy. For example, if unemployment suddenly skyrockets, it could force the Federal Reserve to cut interest rates. However, most economic indicators in the United States still seem relatively stable at the moment. The Federal Reserve’s weakest point right now appears to be the US Treasury bond market.

It is precisely there that the Bank of England had to intervene some time ago. Japan is currently selling hefty amounts of US Treasury bonds to support its own Japanese yen, and China appears to have similar plans as well.

The Federal Reserve itself no longer buys US government bonds and commercial banks no longer have room for this. As a result, there is a chance that there will be no more buyers for US Treasuries and that interest rates will skyrocket, forcing the Federal Reserve to intervene. That could be a potential catalyst for a new crypto bull market.

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