Crypto prices bullish again
Prices of major cryptocurrencies are again looking bullish as traders hope that inflation has peaked and attention shifts to the next US interest rate announcement.
The bullish price action in bitcoin (BTC), ethereum (ETH) and other major coins today came despite a more hawkish tone than expected from Federal Reserve Chairman Jerome Powell during his press conference on Wednesday this week:
“It is very early to think about taking a break. People when they hear “lags” think of a break. In my view, it is very premature to think or talk about pausing our interest rate hikes. We have a ways to go, Powell said at the time.
That compared to the written Fed statement, which was interpreted by most observers as more dovish than before, leaving traders somewhat confused by the Fed’s messages.
Among other things, the statement said the Fed “will take into account the cumulative tightening of monetary policy” as well as “the lags with which monetary policy affects economic activity and inflation” when deciding on its next step.
The Fed’s next interest rate announcement is expected on 14 December.
And while Powell’s comments were enough to send bitcoin and the broader crypto market lower on Wednesday, things began to return to cautious optimism again on Thursday and Friday, as bitcoin posted gains.
In addition to the Fed statement, crypto markets are also supported by a sense that the worst may be over for inflation. That, in turn, is believed to be necessary for the Fed to pause interest rate hikes, and eventually start cutting again.
As is widely known, bitcoin and crypto in general tend to follow stocks and their “risk-on” and “risk-off” sentiment. Unsurprisingly, a pause in interest rate hikes would therefore be considered very bullish for the crypto market.
The strong link between the Fed’s actions and crypto prices has also been pointed out by several heavyweight investors in the space, including Galaxy Digital CEO Mike Novogratz. Speaking at the Bitcoin 2022 conference in Miami in April this year, Novogratz made it clear that “when the Fed stops, I think bitcoin will go to the moon.”
Asked at the same conference how high bitcoin will ever go, Novogratz replied “a million dollars”.
“I pray that the dollar remains strong and bitcoin does not go to infinity. If bitcoin goes to infinity, it will mean that all stability is gone in the West,” Novogratz also told the audience.
As of 14:00 UTC on Friday, bitcoin had traded as high as $20,888 for the day, before falling slightly to a current price of $20,755. The coin has risen 2.5% in the last 24 hours and 2.1% in the last 7 days.
