During his speech on Friday in Jackson Hole, Jerome Powell, the chairman of the FED, gave a speech that dragged the price of Bitcoin and other cryptocurrencies down. Indeed, the current period of high inflation and the need to fight it are not factors conducive to the rise of risky assets.
Jerome Powell sends risky assets and Bitcoin tumbling
On the sidelines of the Jackson Hole Economic Symposium in the US state of Wyoming, US Federal Reserve (FED) Chairman Jerome Powell gave a pessimistic speech, which influenced the price of Bitcoin (BTC) downwards.
The conference brings together representatives of various central banks from around the world every summer and obviously inflation was at the heart of the discussions this year. Thus, during his speech on Friday at 4 p.m. Paris time, Jerome Powell used some heavy words:
“While higher interest rates, slower growth, and looser labor market conditions will reduce inflation, they will also cause hardship for households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean much greater pain.”
So, he says, a return to the 2 percent annual target will take time and sacrifice. This is what is driving the FED to adopt a so-called hawkish policy, which, unlike a dovish policy, sees interest rates rise.
Such a pronouncement by Jerome Powell was a bad omen for risky assets and, by extension, for Bitcoin. At the time of writing, the price of BTC has thus conceded more than 7% in nearly 24 hours.
Towards a longer than expected situation?
Jerome Powell has insisted that the restrictive policy will be maintained until the inflation curve is broken. Currently, the interest rate in the United States is 2.5% and it may well increase in the future, although this decision is not yet made:
“Our decision at the September meeting will depend on the totality of the incoming data and the changing outlook. At some point, as the monetary policy stance tightens further, it will likely become appropriate to slow the pace of increases.”
On our private Grille-Pain group, financial analyst Vincent Ganne returned to energy sector inflation in particular in his daily talk. Electricity prices could indeed play a crucial role in the coming winter. He stresses that although the situation is clearly not engaging, nothing is ever decided in advance:
“The worst-case scenario is not automatic for the fall and winter. It’s so consensual, everyone is predicting the end of the world this winter and you know the market’s ability to be contrarian.”
That’s the difficulty of this period: the data is negative, that’s a fact. That doesn’t necessarily lean in favor of a rising Bitcoin price. But the past has also shown some nice surprises when we weren’t expecting them. So these elements force us to have a clear and well-defined plan to not let the market undermine our daily morale.
