As echoed by U.S. Federal Reserve Chairman Jerome Powell in his recent speech at the Kansas City Fed’s Jackson Hole Symposium, the persistent wave of inflation will demand the continuity of restrictive monetary policy till it shows a sustainable deceleration. Adding that the central bank is geared to further elevate rates as necessary but with careful discretion.
With Powell’s remarks with a hawkish tinge, the quotidien cryptocurrency bitcoin (BTC) observed an initial minor plunge but swiftly rebounded peaking at $26,200, a modest profit for the day. Perhaps, a non-surprising move considering the bearish inclination of bitcoin’s price motion prior to the Jackson Hole event.
Drawing insights from the CME FedWatch tool, expectations from market participants signal around a 20% possibility of another hike in Fed rate during the central bank’s assembly in September – a likelihood seemingly unaltered by Powell’s discourse.
Casting a glance at the traditional markets while Powell spoke, U.S. stock indices exhibited marginal gains roughly around half of a percentage point. The 10-year Treasury yield seemed to bear no significant changes, hovering near a 16-year high of 4.22%.
However, the sustenance of restrictive monetary policies brings with it a bilateral argument – while it is held in high regard for slowing inflation, it also holds the possibility of impeding economic growth due to lending being more onerous. Also, a continued series of hikes in Fed rate can potentially increase the burden on borrowers.
In the crypto world, bitcoin’s agile bounce-back move is suggestive of the cryptocurrency’s resilience towards external monetary shocks. This could lead one to infer that even with the fluctuating traditional markets, cryptocurrencies might hold their ground to present an alternate, and perhaps more stable investment option.
Yet, bitcoin’s bearish predisposition preceding the Jackson Hole event is a reminder of the cryptocurrency’s volatile nature, a point of concern for many. Thus, while the increased rates and sustained restrictive monetary policies pave the road ahead, the journey remains a balance of resilience and volatility in both traditional and cryptocurrency markets.