FED Comments make Bitcoin Price Tumble Down to US$35,000 Level Again
Bitcoin (BTC), other cryptocurrencies, and the wider financial markets saw negative sentiments rule on June 18, 2021. This negative sentiment followed by selling spree was initiated by the comments made by the president of the United States Federal Reserve Bank of St. Louis, James Bullard. He indicated that the first increase in interest rate will happen in late-2022.
Fed Chair Jerome Powell on Wednesday indicated that the hike in interest rate will take place in 2023. His comment led to a significant sell-off across financial markets as the US Dollar gained strength.
The comments of both Jerome Powell and James Bullard strengthened the US Dollar, leading to a decline in the Bitcoin prices to a daily low at US$35,129. In fact, the downward price correction was witnessed in case of other cryptocurrencies as well as a wide array of assets such as stocks and gold. In fact, this phenomenon also shows that Bitcoin is getting more mainstream. The correlation of bitcoin with other traditional assets continues to increase in 2021.
Dow Jones experienced one of the worst weeks since October 2020. In response to the strengthening US Dollar, the 10-year treasury note dropped by 4.04%. In fact, on Friday, S&P 500 and NASDAQ corrected downwards by 1.31% and 0.92% respectively.
Bullard pointed out that the hawkish stance of the Fed is based on the fact that the inflation of the US economy is expected to get higher, especially after the economy reopens following the COVID-19 lockdowns.
“We’re expecting a good year, a good reopening. But this is a bigger year than we were expecting, more inflation than we were expecting. I think it’s natural that we’ve tilted a little bit more hawkish here to contain inflationary pressures.”
In 2021, the inflation rate is 3% and it will drift back to the Fed’s target of 2% by 2022 and beyond.
The prices of other cryptos also declined on Friday as many traders bought stablecoins to avoid market volatility. While Ethereum (ETH) dropped -13%, Amp (AMP) dropped by -33%.