The markets reacted as the Fed revealed its intent to raise rates.
The crypto markets going into the weekend have slumped again for the second consecutive week along with the traditional equity markets following statements by Fed chair Jerome Powell which implied that the Fed is fixed on its course to continue raising rates till it achieves price stability.
“… restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy,”
Powell said, giving the annual Fed policy speech at Jackson Hole, Wyoming. Notably, the Fed chair admits that the stance will cause some pain for households and businesses, but he expressed the belief that failure to tame inflation will lead to worse outcomes.
Following Powell’s speech, Bitcoin dropped by 4.9% to about $20,579, while Ethereum dropped nearly 10% to trade below the $1,500 price point, with most of the crypto market following suit. Stats reports that over $70 billion has been wiped out from the crypto market cap in the last 24 hours.
Unsurprisingly, the stock markets tanked as well, as Business Insider reports that the Dow Jones fell by 1000 points, the S&P 500 by 3.37%, and the Nasdaq by 3.94% following the speech. In addition, WatcherGuru reports that $1.25 trillion was wiped from the stock market.
For the second consecutive week, the crypto markets are plummeting going into the weekend. Last Friday, the markets plunged as the release of the Federal Open Market Committee (FOMC) minutes for July revealed the Fed’s desire to continue to raise rates. As a result, Bitcoin is on course to print a second consecutive weekly red candle. It is worth noting that this year, the leading digital asset set a new record for consecutive weekly losses. Moreover, several analysts are calling for caution as we enter into September, a historically bad month for Bitcoin.
Cardano founder Charles Hoskinson, responding to the news of Powell’s statements, asserted that the Fed could not be trusted. According to Hoskinson, crypto remains the way out despite the bleeding in the crypto markets.
Cryptocurrencies are the way out of this madness. Central Banks can't be trusted with monetary policy. They work for the political process and gave two generations of politicians a blank check that we now have to cover. It's going to get worse before it gets better
— Charles Hoskinson (@IOHK_Charles) August 26, 2022
Meanwhile, Gold bug Peter Schiff noted the divergence in Fed policy with that of the executive as Biden’s administration wants to extend the suspension of loan repayments. According to Schiff, the result will be rising inflation and a shrinking economy.
“Powell claims he wants to put out the inflation fire by raising interest rates to cool demand. Presidant Biden wants to fan the flames of inflation by extending the moratorium on student loan repayments. The conflicting policy results in hotter inflation and a colder economy.”
It is worth noting that Galaxy Digital CEO Mike Novogratz has long noted that for the crypto markets to kick off another bull run, the narrative from the Fed has to change. The Fed has now raised rates for four consecutive months bringing the total to 2.25%.
DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
