In the early morning of December 1, Fed Chairman Jerome Powell gave an expected speech on the interest rate adjustment strategy of the agency that is considered the central bank of the US.
US Federal Reserve Chairman Jerome Powell confirmed that interest rate hikes with a smaller margin will be made right at the next interest rate meeting, although he sees breakthroughs in the fight against inflation partly. much is not enough.
Recalling statements made by many other Fed officials recently and comments after the Federal Open Market Committee’s November policy meeting, he cautioned that monetary policy will likely stay restrictive for some time until real signs of progress emerge on inflation.
“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in remarks delivered at the Brookings Institution.
Mr. Jerome Powell implicitly confirmed that the Fed in the December rate adjustment period will reduce the rate hike to 0.5%, lower than the 0.75% figure of previous increases this year. The reason for this is that the Fed’s board of governors feels that the current interest rates are in a reasonable range to contain US inflation. Even so, Mr. Powell said that the fight against inflation is not over and the Fed will continue to raise rates until the job is done.
Thus, the Fed has indirectly confirmed previous rumors about slowing down the rate of interest rate hikes.
The crypto market has all shown positive signals again with Mr. Powell’s latest statements
Since the beginning of the year, the Fed has had a total of 6 interest rate hikes (of which 4 consecutive increases to 0.75%), bringing the most important parameter for the US economy from 0.25% to 4 %. This is the highest interest rate the Fed has imposed since the 2008 economic crisis in an attempt to curb US inflation, which has remained at a four-decade high for many months.
Specifically, Bitcoin (BTC) rallied nearly 2% to above $17,000, its highest value threshold since Nov.
The green sign is also back on the majority of cryptocurrency trading, with gains in the 1-10% range.
Bitcoin price may fall deeply because of Fed’s announcement of smaller interest rate hikes
The co-founder of Mobius Capital Partners previously correctly predicted that Bitcoin would reach $20,000. He now forecasts Bitcoin price to drop to $10,000 by 2023 after breaking the $18,000-17,000 support.
Experts at Franklin Templeton Investments said that the price of Bitcoin fell deeply due to the US Federal Reserve (Fed) raising interest rates and tightening monetary policy.
“Amid rising interest rates, the appeal of Bitcoin or other virtual currencies becomes less attractive because they no longer generate large profits,” commented Mr. Mobius.
“Many virtual currency companies have offered incredibly high-interest rates of 5% or more for depositors. However, when the price of cryptocurrencies fell and was difficult to liquidate earlier this year, many companies in the crypto world collapsed, partly because of FTX,” he said.
According to Mr. Mobius, the explosion of virtual currency is directly related to the moves of the “Fed money printing machine”. At one point, the supply of USD has increased by as much as 40% in the past few years.
“There is a lot of cash to invest in cryptocurrencies,” Mobius said.
The Fed has been lowering interest rates to extremely low levels and easing quantitatively over the past few years. This helps the financial market boom, the biggest beneficiaries are technology stocks and virtual currencies. However, the Fed has tightened monetary policy this year by sharply raising interest rates.
“Now that the Fed is pulling back on liquidity, it becomes much more difficult for people to enter the market,” commented Mobius Capital Partners co-founder.
Previously, Mr. Mobius forecasted Bitcoin quite accurately this year. In May 2022, when the Bitcoin price fluctuated above $28,000, he forecast that the largest virtual currency could reach $20,000, then recover, but then drop by $10,000.
If the price of Bitcoin reaches 10,000 USD, virtual currency investors will have to go through another difficult period. Before that, the market has seen more than 1.3 trillion USD blown out since the beginning of this year.