Bitcoin Shows Resilience Despite Rate Hike Concerns
Despite recent concerns about further potential interest rate hikes by the Federal Reserve, Bitcoin has shown notable resilience according to analysts. This comes after Fed Chair Jerome Powell's speech at the annual Jackson Hole symposium last week, where he indicated that more rate hikes may be on the horizon as the Fed battles elevated inflation.
According to Sam Callahan, lead analyst at Swan Bitcoin, Powell's hawkish tone at Jackson Hole "spooked" some investors, resulting in declines across various asset classes including Bitcoin. Callahan explained that when risk-free rates continue rising, it "pulls funds away" from riskier assets as investors can earn more attractive yields in Treasuries and money market funds.
Consequently, Bitcoin, equities, and other assets dropped following the latest signal of tightening monetary policy.
Callahan pointed out that inflation has moderated from its peak while unemployment remains near historic lows, however, implying the Fed still has "room to continue hiking" to get inflation back down to its 2% target. Core inflation excluding food and energy is proving stickier, especially in services, which Powell has frequently highlighted.
With the Fed seemingly intent on further tightening, he said continued rate hikes could maintain downside pressure on Bitcoin, which is still largely viewed as a speculative asset.
Interestingly though, Bitcoin's price reaction to key inflation data this year has been rather muted compared to 2022 when aggressive Fed tightening tanked crypto markets, with the currency rallying in 2023 despite CPI dropping from its highs.
Callahan explained that while rising real rates have historically constrained Bitcoin, issues on the fiscal side may be driving more
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