Bitcoin fell below $20,000 again as the Federal Reserve’s hawkish comments about inflation and slowing economic growth continue to weigh down riskier assets.
Over the past five trading days, the largest digital token dropped as much as 2.23% to trade at $19,834, on Saturday. Other cryptocurrencies such as Ether, Polkadot, and Dogecoin also fell. A 100-point index of the most valuable digital coins lost 2%. The S&P 500 also suffered losses. It lost as much as 1.5%, making it the third consecutive day of decline.
Riskier assets have had a difficult few days due to traders digesting comments from Fed Chair Jerome Powell who reiterated that central banking is open to continuing monetary tightening at any cost, even if it means an economic downturn.
“This is still macro-driven Jackson Hole. Jerome Powell gave a hawkish talk and stated that one month’s improvement isn’t enough to bring inflation back to 2%.” Annabelle Huang (managing partner at Amber Group) said this in reference to last week’s Fed meeting. “The language indicated that the market would experience further interest rate hikes until the problem of inflation would be deemed “under control.” She also stated that Bitcoin had retraced below the 200-week moving average.
Friday’s rout in riskier assets began when Powell made clear that the Fed was willing to allow the economy to suffer while it fights inflation. Inflation is far from under control, and macro headwinds will continue weighing on cryptocurrency. The Fed is unlikely to pivot soon, Vetle Lunde of Arcane Research wrote in a note. He said that the macro backdrop would be difficult to navigate over the next years.
Bitcoin was supported by the $20,000 level when it reached its lowest point in recent months. However, cryptocurrency has been climbing higher in the past few weeks. Analysts consider it a psychological threshold that can signal further losses.
Shawn Cruz, head of the trading strategy at TD Ameritrade said that crypto is the riskiest of all risk assets. It makes sense when there is a mix of risk tolerance and risk aversion. You’ll see some volatility rise.
