After a brief relief rally, Bitcoin has crashed under $26,000 again. The top cryptocurrency experienced the crash following Federal Reserve chair Jerome Powell’s speech at Jackson Hole today 24 August.
Powell stated in the speech that the central bank remains committed to bringing inflation down to 2% even if it has to further raise rates.
“Two percent is and will remain our inflation target. We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to that level over time,” he said.
“We intend to hold policy at a restrictive level until we are confident inflation is moving steadily down toward our objective,” he added.
Since the speech, Bitcoin has dropped to $25,882, bringing it back down to the level it was a few days ago before yesterday’s relief rally. However, Bitcoin isn’t the only asset that has been affected.
As expected, other top crypto assets have also crashed, losing all the price gains of the rally. At the same time, major stock indices have also gone into the red following the speech.
Specifically, The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite have been mostly flat today, as Powell’s speech suggests the central bank could bring further tightening.
Further Tightening Will Kill Interest in Bitcoin
Powell’s speech emphasizes efforts to bring inflation down. These have serious implications for Bitcoin and the entire crypto industry, also known as risk assets. The speech was identical to last year’s which led to a bear market as the Fed continued its monetary tightening.
“It is the Fed’s job to bring inflation down to our 2% goal, and we will do so. We have tightened policy significantly over the past year, although inflation has moved down from its peak, a welcome development, it still remains too high,” he added.
If further tightening is done, it could lead to a strengthening U.S. dollar index which will be a roadblock to the growth of risk assets like Bitcoin, as it will diminish the risk-adjusted return associated with the asset, making it less attractive.
The Federal Open Market Committee (FOMC) has since the last Jackson Hole speech, raised the policy rate 300 basis points, and another 100 basis points over the past seven months, bringing the current Federal Funds Rate to 5.25-5.50%.
Is Crypto in Trouble?
The crypto market has been up and down this year, but it has gotten worse recently. Bitcoin crashed under $30,000 few weeks ago and hasn’t recovered yet, and under $26,000 now.
With Powell’s speech, things could get even worse if the tightening continues the way it did last year.
.
