This week brought pivotal news for cryptocurrency supporters as the Federal Reserve shared its position on interest rates and Bitcoin. The expected delay in substantial interest rate reductions has been confirmed, further impacting Bitcoin’s performance. Fed Chair Jerome Powell’s firm comments regarding Bitcoin have significantly contributed to the downturn in cryptocurrency values.
What Did Powell Say About Bitcoin?
Jerome Powell, who is set to continue his role at the Federal Reserve for at least another two years, is not easily replaced. Former President Trump remarked that dismissing Powell could jeopardize economic stability, allowing Powell to serve his term until 2026. Moreover, the challenge of ousting a Fed chair often leads to complex legal disputes, which Powell is likely to win.
Why Are Cryptocurrencies Falling?
Despite Powell’s remarks, there is skepticism about whether Republicans can successfully pass legislation supporting Bitcoin, even with their current majority in Congress. Many Republicans remain ambivalent, making legislative success appear unlikely. Additionally, as Bitcoin declines, alternative cryptocurrencies are also experiencing significant losses, with Ethereum facing downward pressure.
The decline in cryptocurrency values can be attributed to several specific factors:
- Predictions indicate only one or two interest rate cuts in 2025.
- The Fed expresses uncertainty about reaching a 2% inflation target within two years.
- Powell is against accumulating Bitcoin reserves.
- Possible interest rate hikes loom if inflation fails to decline.
- Strong employment figures paired with stagnant inflation could prevent interest rate cuts next year.
- The focus has shifted from interest rate cuts to a pause in reductions.
- A 90% probability exists for no interest rate cuts in January, maintaining current rates.
- The dollar index has reached unprecedented highs.
- U.S. stock markets are also experiencing downward trends.
The recent statements from the Federal Reserve are reshaping market expectations and investor sentiment regarding Bitcoin and the broader cryptocurrency landscape. The interplay of economic indicators, regulatory remarks, and market reactions will continue to play a crucial role in determining the future trajectory of Bitcoin and other digital assets.