- Ethereum, Bitcoin and altcoins dropped in the red zone this weekend.
- Jerome Powell warned against painful economic measures that may be taken to tame the sky high inflation.
- Bitcoin – the top crypto asset by market cap fell well below 2% and Ethereum the second largest crypto asset fell below 4% after Powell’s vow to put away the mounting numbers of inflation.
BTC struggled to keep up with $20,000 resistance level
Bitcoin had been trading at $20,000 and fell below the threshold late Sunday. The investors are disappointed after learning that the Fed will not change the recent interest rate hike anytime soon. The Personal Consumption Expenditure has increased by 4.8% excluding food and energy, still outweighed a trend of uncertainty on Bitcoin slamming the hopes of investors and crypto prices. The Fed chair’s talk on Friday cautioned against premature policy loosening.
“These are the unfortunate costs of reducing inflation,” Powell said at the Fed’s annual economic conference in Jackson Hole, adding that failing to restore price stability would mean “greater pain” for U.S. households.
Crypto assets like MATIC, XRP, DOGE logged a 3% drop
Crypto tokens other than BTC and ETH also took the hit within a two-hour window. Chainalysis reported that the crypto market saw a sharp rise of BTC inflow to exchanges. Monero (XMR) saw a 1% rise while other assets. Polkadot (DOT) and Solana (SOL) MATIC (MATIC), Ripple (XRP) dropped subsequently after BTC and ETH tumbled minutes after Powell’s speech.
Additional Read: 5 Ways to Survive the Crypto Bear Market: Beginners Guide
Powell’s strategy on combating inflation attack Crypto and Traditional Markets
The crypto market cap briefly dipped to $936.87 million after Powell’s speech.
The US inflation is at its highest compared to the last four decades’ pattern. Inflation is an aftermath of the pandemic that took over the world. Nasdaq and S&P saw a drop of 4 and 3.3& respectively. The CNBC report on Friday hinted at ETH whales making an exit ahead of the anticipated ETH merge. With rising unemployment numbers and a relatively low purchasing power, investors fear pumping money into crypto and traditional markets.
The hopes of the Fed correcting interest rates were crushed with Powell’s speech at the hole. The hike in interest rates in 2022 (0.5% in May 2022 and 0.75% in July 2022) has sent fear currents to world markets as changes in the US economy do have a domino effect on other countries’ economies as well.
After Powell’s speech, $1.25 Trillion was wiped off the U.S. Equities Markets, higher than the crypto market cap slump.
Japan is on the anvil to restructure its crypto tax rates. The country’s financial services agency (FSA) and the ministry of economy, trade and industry are considering proposing a tax reform for 2023 to help crypto startups receive an exemption on crypto from paying taxes on unrealized gains.
— Lark Davis (@TheCryptoLark) August 27, 2022
Take on Powell’s approach to tackle inflation
“In essence, Powell is clearly stating that right now, fighting inflation is more important than supporting growth,” Jeffrey Roach, chief economist at LPL Financial, told CNBC.
“They won’t want to be remembered as the central bank that missed inflation or even spurred inflation higher,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds, told The Wall Street Journal.
Additional Read: Crypto Market Cap Nosedives Below $1 Trillion
Source: Decrypt, Coinmarketcap, CoinDesk