The crypto market reacts to the Fed Chairman’s speech regarding inflation measures
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Answer The crypto market reacts to the Fed Chairman’s speech regarding inflation measures
In his speech yesterday, Jerome Powell explained that the current inflation rate in the United States has exceeded 2%, which is a high number.
He also pointed out that the inflation rate in the world is much higher than in the United States of America.
Powell added that the efforts that the government should take in order to slow inflation include raising interest rates and easing business conditions, which could cause some pain for the economy.
Restoring price stability will likely require maintaining a restrained political position for some time.
The Fed chief insisted that the historical record strongly cautions against premature easing.
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In his speech, Powell emphasized:
The Federal Reserve System is ready to use our tools aggressively to fight inflation that is the highest the country has seen in 40 years.
It also encouraged companies to accept current inflation and take necessary measures to adjust their business models to current market conditions.
The news of the interest rate hike was not well received by the markets.
The Dow Jones Industrial Average fell 611 points (1.85%) during and immediately after the Fed Chairman’s speech.
The US Nasdaq lost 2.7%, while the S&P 500 lost 2.2%.
The entire US stock market is in the red at the time of writing, with major tech companies such as Microsoft, Tesla, Apple and Amazon having lost as much as 4% of market capitalization.
The crypto market reacted to the news in a similar way, recording notable losses.
The total value of the crypto market drops below $1 trillion:
The entire cryptocurrency market cap fell from over $1 billion before the speech to $955 million immediately afterwards.
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Bitcoin price has fallen below $21,000, losing nearly 6% in the last 24 hours and trading at $2,0242 at press time.
Ethereum, the second largest cryptocurrency by market cap, saw its price drop by more than 9% and fell to $1,503.
Historically, the cryptocurrency market has acted completely independently of major political and financial news, but over the past couple of years, markets have become more correlated with each other, destabilizing the belief that bitcoin is a great hedge against inflation.
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