07/04 update below. This post was originally published on July 03
Bitcoin
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The bitcoin price has struggled over the last month, dropping almost 15%, as fears of a “true correction” swirl.
Now, after one of the biggest bitcoin bulls has said the cryptocurrency could eventually replace the U.S. dollar, Federal Reserve chair Jerome Powell has warned of a “critical period” for the Fed, calling deficit levels “unsustainable.”
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U.S. Federal Reserve chair Jerome Powell has warned the Fed is facing a “critical” period that could … [+]
“The level of debt we have is completely sustainable but the path we are on is unsustainable,” Powell said during the European Central Bank’s Portugal conference, it was reported by the Financial Times, adding the Biden administration was taking excessive risks by “running a very large deficit at a time when we are at full employment” and said “you can’t run these levels in good economic times for very long.”
In May, Treasury secretary Janet Yellen issued a serious warning over the spiraling $34 trillion U.S. debt pile that some think could help propel the bitcoin price to $1 million over the next 18 months.
Bitcoin, crypto and stock market traders have been closely watching the Fed for signs it will begin cutting interest rates in recent months, with analysts forced to dial back expectations of around seven cuts in 2024 to just one or two.
“Getting the balance on monetary policy right during this critical period, that’s really what I think about in the wee hours,” Powell said in response to a question about his top worries, the AP reported.
07/04 update: The bitcoin price and crypto market has suffered a major crash over the last 24 hours, with the bitcoin price diving well under $60,000 and wiping $200 billion from the combined crypto market since July 1. Ethereum and the rest of the major market are down more steeply than bitcoin, with ethereum rival solana, the Telegram-linked toncoin and the meme-based dogecoin all down almost 10% since this time yesterday.
“Bitcoin is breaking significant technical and psychological levels at $60,000,” Markus Thielen, the founder of 10x Research, wrote in emailed comments.
“This is a key level for bitcoin miners and bitcoin spot exchange-traded fund (ETF) buyers, and it also broadly marks the bottom (support) of the three-month trading range. Price declines could accelerate as support gets broken and sellers scramble to find liquidity. Only ill-informed traders are willing to buy here. Breaking this support could cause a sharp decline to the low $50,000s.”
Last month, the Federal Reserve left interest rates unchanged and signaled it would make just one cut in 2024, with more to come in 2025. The Fed has come under pressure to cut interest rates after hiking them at a record-setting clip in the aftermath of huge Covid-era stimulus spending and money printing that sent inflation spiraling out of control.
“Powell said the U.S. was back on a ‘disinflationary path’ but added that more data was required before the Fed would consider cutting rates,” Russ Mould, investment director at AJ Bell, said in emailed comments. “The latter phrase sounds a bit like a broken record as far as the market is concerned, so the most important part of Powell’s speech was the reference to disinflation, as investors interpreted it to mean there is a stronger case for cutting rates soon.”
Eyes are now turning to Wednesday’s release of the Fed’s June meeting minutes and Friday’s jobs report which could “cement” expectations of a September interest rate cut if it shows hiring has slowed.
“A softer-than-expected jobs report on Friday, were it to come to pass, would likely further cement the case for said cut, to which markets assign a roughly 70% chance—perhaps, a touch underdone,” Michael Brown, senior research strategist at Pepperstone, told MarketWatch.
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The bitcoin price has dropped back from its recent peak of over $70,000 per bitcoin.
The higher-for-longer interest rate environment has triggered a warning from analysts at the world’s largest asset manager BlackRock, who said an “unprecedented” scenario is unfolding that could hit the bitcoin price and crypto market.
“We see central banks forced to keep interest rates higher than pre-pandemic to tackle persistent inflationary pressures,” the analysts at BlackRock, which has helped to engineer a bitcoin price boom this year by leading a spot bitcoin exchange-traded fund (ETF) revolution on Wall Street, wrote in a report.
Read More: Fed’s ‘Critical’ Warning Sparks Serious $50,000 Bitcoin Price Crash Alert As $200 Billion
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