Bitcoin to trade sideways until Fed meeting, says crypto exec

Key Takeaways

• Bitcoin dropped 2.7% after Fed Chair Powell's remarks on maintaining higher interest rates.
• Crypto markets face potential volatility due to Fed's cautious approach to rate cuts.

The Fed’s Chairman Jerome Powell spoke at Sintra yesterday and doubled down on his moderate tone shown recently. Powell reinforced that the Fed needs to be more confident before cutting interest rates, highlighted that a 4% unemployment rate is “still very low,” the return of disinflation, and that he doesn’t see 2% inflation this year or the next.

As a result, Bitcoin (BTC) registered a 2.7% pullback in the past 24 hours and lost the $60,000 price level for most of Wednesday. Moreover, the outlook doesn’t look grim only in the short term after Powell’s remarks. 

Ben Kurland, CEO of DYOR, highlights that disinflation is generally regarded as a favorable indicator, but the Federal Reserve’s insistence on requiring greater assurance before lowering interest rates indicates that the stability of the economic environment hasn’t been achieved yet. “This prevailing uncertainty is anticipated to result in volatility within the cryptocurrency markets,” he added.

Notably, Kurland stated that the Fed’s projection that 2% inflation will not be achieved this year or next, combined with a very large and unsustainable budget deficit, raises concerns about long-term economic stability. 

Additionally, despite a 4% unemployment rate showing resilience, it also implies that the Fed may maintain higher interest rates for longer, which traditionally has dampened investments in riskier assets like crypto.

“Overall, Powell’s cautious approach suggests that immediate rate cuts are rather off the table, which should lead to sideways or downward trends in the crypto markets until the Fed meets again to reassess the situation.”