The bitcoin price fell under the key $20,000 per bitcoin level over the weekend (something feared by some influential traders) before surging back. Ethereum meanwhile dropped under $1,000 per ether for the first time since January 2021 as the network braces for a controversial upgrade.
Now, after the Federal Reserve stunned markets with the biggest interest rate hike since the 1990s, the billionaire chief executive of crypto exchange FTX Sam Bankman-Fried has blamed the Fed for the bitcoin and crypto price crash and warned people are “scared” ahead of Fed chair Jerome Powell’s hotly-anticipeted testimony tomorrow.
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“Literally, markets are scared,” Bankman-Fried, often known simply as SBF, told NPR this week. “People with money are scared.”
Bitcoin and crypto prices have crashed along with stock markets in recent months, with the S&P 500 falling into a bear market last week, dragged lower by technology companies that had soared through the pandemic era.
“The core driver of this has been the Fed,” SBF said, adding Powell is “caught between a rock and a hard place” as he battles to drive down soaring inflation that accelerated to 8.6% in May, an eye-watering 40-year high.
On Wednesday, Powell will speak before the Senate Banking Committee for the first of two days of semiannual testimony on monetary policy where he’s expected to outline how far and fast the Fed could go to combat inflation while trying not to trigger a recession.
“The [Fed’s] commitment to restoring price stability—which is necessary for sustaining a strong labor market—is unconditional,” the Fed wrote in its twice-yearly monetary policy report to Congress last week.
After the Fed hiked its benchmark interest rate by 75-basis points for the first time in nearly three decades last week, new economic projections revealed policymakers expect interest rates to hit 3.4% by the end of 2022—their highest level since 2008.
The mood among crypto market watchers is bleak despite this week’s bitcoin price bounce.
“The bear market will likely continue until we hear from the Fed the first hints of a halt to aggressive policy tightening,” Alex Kuptsikevich, FxPro senior market analyst, said via email.
“What should be noted is that important options expiries are coming up in the next few days, so volatility can be expected, but the macro trend is likely to remain bearish until we see the Fed changing or at least relaxing their stance in July’s [rate-setting] Federal Open Market Committee meeting,” Joe DiPasquale, the chief executive of bitcoin and crypto hedge fund BitBull Capital, wrote in emailed comments.