The top 10 cryptocurrencies, including bitcoin, Ethereum, BNB, XRP, Cardano, dogecoin, polygon, and Solana, have shown some progress into 2023, and new excitement has been generated about a potential “multi-billion dollar” opportunity.
- Influential investors predict the Fed may start a new bull run in Bitcoin and other cryptocurrencies due to persistent inflation and a potential recession.
- The Fed’s ultra-loose monetary policy, which included reducing interest rates to essentially zero and adding trillions of dollars to the Fed balance sheet, has negatively impacted the price of Bitcoin, cryptocurrencies, and stock markets.
Massive Fed Bombshell
Rising crypto interest from Chinese traders has shaken prices. The bitcoin price has increased by about 50% since the start of the year. They are driving up the cost of Ethereum and other popular cryptocurrencies. Influential investors have predicted the U.S. Federal Reserve may soon start a new bull run for bitcoin and other cryptocurrencies as analysts examine the most recent economic data for indications of persistent inflation and a potential recession.
“I’m quite enthusiastic about bitcoin and crypto,” said Arthur Hayes, the former CEO of BitMex, “because I believe in the response that the monetary and fiscal authorities will do in another difficult situation. They’ll then print it and distribute it to others.”
Hayes forewarned that the price of bitcoin may fall below $20,000 soon. According to Hayes, a “correlation one” moment will likely happen. That implies a significant drop, with bitcoin included.
Fed’s Policies
The Fed’s ultra-loose monetary policy, which saw interest rates essentially reduced to zero and trillions of dollars added to the Fed balance sheet since the start of the Covid epidemic, contributed to the bitcoin price’s peak of approximately $70,000 per bitcoin in 2021.
Over the past year, as the Fed has raised interest rates to reduce inflation, the price of bitcoin has fallen to around $16,000, wiping out roughly $2 trillion from the market for bitcoin, Ethereum, and other cryptocurrencies as a whole.
The rise in bitcoin price, which expanded to Ethereum and other major cryptocurrencies this year, was sparked by speculators’ growing confidence that the Fed has already won the war on inflation and will adopt a dovish attitude if the economy enters a recession.
Expert’s Stance
Russ Mould, the investment director at brokerage AJ Bell, attributed the global rally in prices since October to the expectation of decreasing inflation, halting interest rate hikes, and potentially even seeing rate cuts, leading to a soft landing for the global economy or even a potential increase in economic growth.
Investors are re-evaluating the likelihood of the anticipated golden trifecta due to the economy’s resilience, stubbornly persistent inflation (excluding energy), and central bank governors’ harsh rhetoric. So, the markets’ current focus is that good news for the economy is bad news for asset values since it may push interest rates to rise for longer than anticipated. Nonetheless, the risk of recession is still present and should not be taken lightly.
Conclusion
Although the market won’t be fully convinced of this until they see the July CPI, expected to be released this Wednesday, inflation will probably decrease in July due to lower oil prices. Bitcoin will likely profit from the prospect of a slower rate hike. The Fed has been fighting rising inflation this year by starting a string of historical interest rate increases and reducing its large stimulus programs from the epidemic era, which have had a significant negative impact on the price of bitcoin, cryptocurrencies, and stock markets.
