Bitcoin and Ethereum started in the green this morning as the Asian markets opened, but have since returned to the red. That has everything to do with statements by Federal Reserve Chairman Jerome Powell, who said yesterday that the economy is still far too strong and that his central bank is “willing to write down the pace of rate hikes” to restore price stability. let it turn.
What does this mean?
Basically, over the past year, we’ve seen what it means when the Federal Reserve aggressively raises interest rates. Both the Bitcoin and the Ethereum price took a hit as a result of the higher interest rates and ended up in serious trouble.
The Federal Reserve is currently raising interest rates to control inflation. It was extremely high last year and again this year it has not yet been possible to get it back to the target of 2.0 percent.
The persistent inflation, in combination with the strong economy, means that the Federal Reserve now wants (and can) raise interest rates even further if necessary to get prices back to the desired level.
Unfortunately for us as investors, that’s not the most favorable environment for risk assets like Bitcoin. We see that reflected in the price today, which, at $ 22,000, is slightly lower than yesterday.
Interest rate meeting of March 22
The next Federal Reserve rate decision is scheduled for March 22. Currently, the Federal Funds Target Rate is in the range of 4.50 – 4.75 percent. For a long time it was expected that the Federal Reserve would raise interest rates by 0.25 percent in March, but that has changed after Powell’s speech.
At the time of writing, the chance of a rate hike of 0.25 percent – ​​according to the market – is only 26.5 percent. Yesterday before Powell’s speech, that percentage was 68.6 percent and one month ago it was even 90.8 percent.
The roles have now been reversed and an interest rate increase of 0.50 percent is most likely with 73.5 percent. In that respect, according to the market, it is almost certain that the Federal Reserve will increase the rate of interest rate hikes and that could well mean a difficult period for the Bitcoin price.