The Bitcoin price reportedly dropped by almost 3% on November 14 following comments from Federal Reserve Chair Jerome Powell that there is no pressing reason for the central bank to reduce interest rates. This statement shook the cryptocurrency market since the traders anticipated potential rate cuts in December. Powell made these comments during a speech in Dallas, Texas, and dwelt on the conservative stance of the FED on policy due to high inflation volatility.
Market Sentiment Takes a Hit from Fed’s Stance
Bitcoin investors pay special attention to Federal Reserve policy because interest rates have large effects, for example, on the stock exchange. Lower rates typically trigger investments in relatively risky securities, such as Bitcoin, as secure counterparts, such as bonds, down their allure. However, this optimism was short-lived after Powell’s latest statement ruled out any rate cut in the near future.
“This is not an indication that a signal is coming from the economy that we need to rush in the reduction of its rates,” Powell said during his speech. This comment follows two recent rate cuts: reduced it by 50 basis points in September while the other 25 basis points were cut in November.
The next interest rate decision is due on December 18, but traders are not too sure now. The Kobessi Letter which is a financial newsletter opined in a tweet that the probability of a 25 BPS rate cut had now reduced to as low as 59%. “The ‘Fed pivot’ is being again unwound,” it said.
Bitcoin Price Reacts to Fed’s Hawkish Signals
The Bitcoin price reduced by 2.79% in the wake of Powell’s speech and was trading at a low of $86,979 based on data from CoinMarketCap. Cryptocurrencies also fell, and though Bitcoin managed to climb back to $88,100, the cryptocurrency was still 2.74% down from the day before.
Scholars reason that this is due to the diminishing hope amongst Bitcoin traders about a favourable change in monetary policy. Crypto trader Ava Marshall said, “BTC tends to advance during accommodative monetary policies, but Powell is putting brakes on that dent the spirits of the market.”
Worse still, inflation figures out on the same day revealed that the US Producer Price Index (PPI) for October was at 2.4 percent annually slightly above the expected 2.3 percent. Higher number of just marginally above the expectations may continue to dampen the Fed’s appetite for rate cuts in the short term.
Broader Implications for the Crypto Market
The fluctuations in the Bitcoin price is often times used as a reference for the rest of the market. Similarly, prospect denote that as the leading digital currency Bitcoin price struggled downwards, so did other coins. Ether (ETH), the second cryptocurrency by market capitalization, aged 2.1%, and other altcoins, including Cardano (ADA) and Solana (SOL), also declined.
The instability in the U.S monetary policy is expected to maintain high volatility in the market. Normally, the reduction of interest rates leads to high-risk securities such as cryptocurrency assets. On the other hand if the rates are high or there is a long-term precaution from the Fed then such investments are discourage.
Economist Nouriel Roubini commenting on the lasting implications shared that “Some of Trump’s policies that include corporate tax cuts as well as deregulation might help spur growth but tariffs and trade frictions might raise interest rates.” The experience described by Roubini shows that it is not easy to understand the factors that evoke positive or negative response among market members.
Conclusion on Bitcoin Price Decline
Thus, the reactions of Bitcoin price to the statement of the Fed chairman evidenced that the cryptocurrency is sensitive to the monetary policy. As there are no more indications of a rate cut in the near term, traders, and investors might well have to face an uncertain environment in the build up to the Fed’s meeting being scheduled December 18.
Currently, the enthusiasts in the BTC market wait for those signs nervously while they would like to know how the global economy will develop in order to understand the direction of the further evolution of both the classic and crypto-based financial markets. Whether or not this downturn is just a blip on the radar or a harbinger of leaner days to come cannot be said yet.
This way, investors are always aware of changes in the system so that they might adjust the positions they take to handle the fluctuations in the Bitcoin price market. Keep following Turkishnyradio to keep an eye on crypto latest developments and Bitcoin price.
