Bitcoin Swinging Below $27,000 Mark Due To Modestly Dovish Remarks By Fed Chair Powell

Bitcoin Swinging Below $27,000 Mark Due To Modestly Dovish Remarks By Fed Chair Powell

Most traders believe that the U.S. Central will now halt its series of hikes in the interest rate in the meeting it will hold in June. Bitcoin (BTC) continued to trade below the $27,000 mark due to the comments of Jerome Powell, U.S. Federal Reserve Chair.

He said that the stress in the banking sector will lead to the central bank loosening its grip on the rate hikes as it continues to curb the recent inflation. With the news, the biggest cryptocurrency in terms of market capitalization went down to the low point of $26,800 on 20th May 2023.

On Friday, the price of Bitcoin increased to nearly $27,200 after Powell and Ben Bernanke, former Fed Chair, appeared at the Thomas Laubach Research Conference. Powell commented that the interest rates won’t go as high as anticipated due to the credit stress.

Tighter Credit Conditions Mean that Interest Rates Might Not Go to High

Powell also highlighted that the financial stability tools played a major role in making the conditions peaceful in the banking sector. He further added that developments on the other end are leading to thought credit conditions and will possibly impact economic growth and inflation.

“These factors would consequently mean that the interest rate would not go as high as we previously thought to accomplish our objectives,” he continued.

Powell said that the evaluation of decisions regarding the interest rate with be a “continuation” as he mentioned earlier addressing the media after the Federal Open Market Committee (FOMC) meeting in May.

Traders Hopeful of a Pause in the Interest Rate Hikes

According to the CME FedWatch tool, it shows that around 80% of traders are expecting a pause in the interest rate hike in the next meeting that will be held in June. Some of them also expect a cut in the interest rate to happen later this year.

However, it is too early to predict anything that this point. Edward Moya who works at the foreign exchange market maker Oanda as a senior market analyst commented on the situation “The head of the Fed seems willing to indicate patience concerning upcoming tightening”

Bitcoin also managed to hang onto its gains with the indication by Fed Chair Powell regarding the possible halt of the Fed’s hike in interest rates.

Following the news, the top-notch currencies in the crypto market saw an increase in their value. Ether (ETH) which is the second biggest cryptocurrency after Bitcoin in terms of market capitalization was trading around $1,809 on Friday.

In addition to that, Injective Protocol’s INJ also saw an increase of 10% for the trading day with an all-day high of $7.07. On the other hand, there were also some laggards on Friday, such as the Layer 2 blockchain Optimism’s OP, which dropped by 3% going to $1.66.

Continuous Hike in Interest Rate to Control the Growing Inflation

The U.S. Fed has been hiking interest rates in a bid to curb the growing inflation which is making the cost of living higher for the average American. It has been hiking the interest rates for the past 14 months to prevent the economy from overheating.

This along with the debt ceiling is one of the major challenges that are acting as a hurdle for the US economy. Following the war between Russia and Ukraine, there has been also a significant increase in oil and food prices, leading to inflation globally.

Additionally, there have been growing concerns about a possible US default, leading to ambiguity among crypto traders. Powell’s recent statement about the pause in rate hikes gives traders hope that there would be a possible rate cut sometime this year.