The global financial market took a hit on November 30 after comments from Jerome Powell, chairman of the US Federal Reserve, hinted that inflation and the Omicron variant of COVID-19 are growing threats and that money policies easy bank could end earlier than planned.
Before Powell’s comments, Bitcoin (BTC) had been on the rise, with the digital asset rising 6% from a low of $ 55,840 in the early trading hours on November 30 to an intraday high of $ 59,200, but the price fell back below $ 57,000 after Powell’s remarks.
At the time of writing, Bitcoin has managed to regain the $ 58,000 level, but a number of technical indicators indicate that traders are not very sure about the next move of the major cryptocurrency.
Stocks and commodities plummet
Bitcoin wasn’t the only asset to be affected by the Fed’s comments. According to the CryptoQuant economist and analyst, Jan Wuestenfeld, the dollar index (DXY) rose while the DOW, gold and other equity indices fell.
Wuestenfeld said:
“The US dollar index is appreciating on Powell’s comments that the Fed could speed up tapering (as credible as it is). Everything else goes down. Gold included.”
The Fed “behaves binary”
The market analyst and former Treasury employee, Nik Bhatia, delved into the actions of the Fed, highlighting that it “does not have the ability to react to dynamic conditions” and, instead, “behaves in a binary way.”
Bhatia said:
“If things go well, he can tighten up the policy. If the economy is in trouble, he can soften the policy.”
According to Bhatia, “inflation is red hot in the United States” with “headline statistics pointing to multi-decade increases in aggregate price levels.”
At the same time, the Fed has applied “essentially more relaxed monetary policy than ever”, leading Bhatia to warn that “with the onset of inflation, this will soon come to an end.”
He added:
“The Fed is clearly heading for a policy error in which it tightens policy even though long-term growth and inflation expectations are falling, due to the tightening of monetary policy itself (that’s why it is called a policy error) “.
Inflation is no longer “transitory”
Interestingly, Powell’s comments acknowledged that the one-year mantra of “transitory inflation” is coming to an end, and the chairman of the Federal Reserve suggested that it is time to “retire” the narrative that it is transitory.
Federal Reserve Chairman Jerome Powell just suggested that we stop using the word “transitory” when speaking about inflation.
“I think it’s probably a good time to retire that word and try to explain more clearly what we mean.”
It was never transitory and everyone knew that.
– Pomp (@APompliano) November 30, 2021
While it is positive to see a little more honesty from the Fed, Bitcoin bull Anthony Pompliano noted that the average person knew all along that inflation was anything but “transitory” in nature and will likely remain a problem well into 2022.
The total cryptocurrency market capitalization currently stands at $ 2.639 trillion and Bitcoin’s dominance index is 41.2%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves risks, you must do your own research when making a decision.
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