Bad News is Good News: Bitcoin Plays With USD 24K as Traders Speculate on Fed Pivot and US Recession
The price of bitcoin (BTC) traded above USD 24,000 on Friday morning (UTC), reaching its highest in nearly 7 weeks, after news that the US has entered what many consider a technical recession, as well as speculations that the US Federal Reserve (Fed) will soon turn from aggressive tightening to easing.
The gains in the crypto market this week started on Wednesday, when the Fed announced its latest 75-basis point rate hike in the US, a move that would normally be seen as negative for risk assets. But since the hike was largely expected by market participants, attention instead shifted to the tone of the Fed’s statement and Fed Chair Jerome Powell’s press conference, which was seen as slightly less aggressive than before.
In his press conference, Powell said that “another unusually large increase could be appropriate at the next meeting” in September. However, he also added that as rates become more restrictive, it will likely be appropriate to “slow the pace of increases.”
Additionally, bullish sentiment among traders was boosted by comments from Powell that an interest rate of 2.25% to 2.5% by the Fed is considered “neutral.”
The wording has puzzled many, including the well-known investor Bill Ackman, founder and CEO of Pershing Square Capital Management, who wrote on Twitter that it “makes no sense” to call a rate of 2.25% to 2.5% neutral when inflation is 9%.
The comment was picked up by Sven Henrich, a popular trader on crypto Twitter and founder of NorthmanTrader, who advised his followers to watch closely for any new comments from Fed officials in the coming days.
Notably, some already warned that the market may have read Powell in the wrong way, and stressed that the Fed remains committed to bringing inflation down.
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