The horizontal dynamics of the market and leading cryptocurrencies are a consequence of the statement of Fed Chairman Jerome Powell.
During the Senate hearing to approve Powell for a second term, he was asked why the Fed’s report on the cryptocurrency market has not yet been published. The report was supposed to be issued as early as September 2021 and the case for launching a digital dollar was expected to be clarified in it too. Investors were awaiting the publication of the document.
In August-September, the market dipped. But after the report wasn’t issued on the promised date, bitcoin and other leading cryptocurrencies continued to rally and even hit new all-time highs. Answering a question, the head of the Fed said that the report is actually ready, Fed just waiting for the right time to issue it.
Now the markets are in a state of turbulence due to high inflation and expected measures to reduce it. The report will definitely be published, said Jerome Powell. But do not expect that it will present ready-made recommendations on cryptocurrencies or the digital dollar. This will be the beginning of the discussion, not the end of it, said the head of the Fed.
Earlier, Powell hinted that the central bank digital currency (CBDC) is being considered by the Fed as an alternative to cryptocurrencies. China has already gone down this way. Since May 2021 a complete ban on operations with bitcoin and other cryptocurrencies has been realized in China. The US has been in a trade war with China for a long time. Rivals can draw approaches to finance from each other. However, the ban on cryptocurrencies in China has not prompted similar bans in the US or other developed countries. Everyone is probably waiting for the results of the mass testing of the digital yuan, which will take place during the Olympic Games.
Meanwhile, experts are positive about the leading cryptocurrencies and bitcoin in particular. After a weak start to the year, bitcoin is expected to rise. BTC will stay in the $40K-$60K range for a while before continuing its rally. Gavin Smith, CEO of Panxora, notes:
– This would set bitcoin up for a move to new highs later in the year. We predict the catalyst for this move to be stubbornly high inflation numbers coupled with a continuation of negative real interest rates.
As a result of “ultra-loose monetary policies”, investors lose value if they invest in bonds and other fixed-income instruments. Cryptocurrency in this case becomes more attractive. According to Craig Erlam, senior market analyst at Oanda, if bitcoin can overcome the $45K resistance level, then a sharp increase could follow. This will mean that the worst is over.