Why is the total crypto market cap — which is currently (as of 8:30 a.m. UTC on August 29) around $997.7 billion –below $1 trillion? Well, if you ask most crypto analysts, they will probably tell you that the reason is the hawkish tone of Federal Reserve Chair Jerome Powell’s speech about inflation August 26, which brought major pain to both U.S. stocks and crypto.
Last Friday, Powell gave an important speech at the 2022 Economic Policy Symposium (in Jackson Hole, Wyoming), which was hosted by the Federal Reserve Bank of Kansas City.
In a speech titled “Monetary Policy and Price Stability”, Powell said:
“The Federal Open Market Committee’s (FOMC) overarching focus right now is to bring inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone…
“Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.
“July’s increase in the target range was the second 75 basis point increase in as many meetings, and I said then that another unusually large increase could be appropriate at our next meeting. We are now about halfway through the intermeeting period. Our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook. At some point, as the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases.“
Naturally, Powell’s hawkish tone made investors and traders nervous, leading to a sell-off in both U.S. stocks and cryptocurrencies.
On August 24, crypto analyst Josh Rager shared his medium to long term prediction for the price of Bitcoin:
He went on to say:
“Again pure speculation here with both timing and price … I’m not one to want to predict the price of Bitcoin but what I can say is I expect 18 more months of a large range for Bitcoin… Followed by fireworks after the next BTC halving March/April 2024 up through 2025“
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